No Respite From Higher Fuel Prices Anytime Soon, Indian Crude Prices Up

The average price of the Indian crude oil basket this month has jumped to $107.27 per barrel as of May 18, 2022, a jump of over 4 per cent compared to near $103 per barrel average in April; data showed on Thursday.

Indian crude oil basket prices have averaged $107.27, the highest this year so far. Indeed, the averages this year are $84.67 per barrel in January, $94.07 in February, $112.87 in March and $102.97 in April. 

According to the latest Petroleum Planning and Analysis Cell report on Thursday, the price of Indian crude was $110.25 per barrel on May 18, 2022, at an exchange rate of (Rs/$) 77.57.

That rupee exchange against the dollar has also weakened, and the latest rate is an all-time low figure, which will increase India's crude purchase costs as a weaker currency increases import prices.

Indeed, India depends on imports for about 85 per cent of its oil requirements. A weakening currency adds more burden on importers as domestic buyers need to pay more rupees in exchange for a dollar to pay for fuel from international markets.

While domestic petrol and diesel costs have remained steady for over a month, India's average crude oil purchase price surge will likely keep fuel prices elevated.

The surge in Indian crude oil basket prices, coupled with a weakening rupee, suggests an upward pressure likely on domestic fuel rates in the coming days.

Also, expectations are that the path of least resistance for global crude is a rise and is likely to drive Indian crude prices even higher and, in turn, push domestic retailers to hike fuel rates.

Global oil markets have gone through wild gyrations since Russia invaded Ukraine on February 24; Brent and US crude futures have, for the most part, traded above $100 per barrel.