Updated: March 25, 2021 10:14:24 pm
Oil trading companies on Thursday cut gas and diesel prices for the second day in a row after a nearly six-month period in which gasoline and diesel prices rose steadily to record highs across the country. The OMCs cut the price of gasoline by 21 cents to Rs 90.78 per liter and cut the price of diesel by 20 cents to Rs 81.1 in the national capital on Thursday as the price of Brent crude fell from a high. from $ 70 a barrel in early March to $ 63.5 on Thursday.
We explain the background and triggers for the change in fuel prices.
Why are the WTO reducing fuel prices now?
Oil trading companies are slashing gasoline and diesel prices after holding them constant for a 24-day period that has seen significant volatility in global crude oil prices. Sources noted that the OMCs had halted price revisions despite rising crude prices, as fuel prices had become an electoral issue in upcoming key state elections in West Bengal, Tamil Nadu, Kerala and Assam.
Experts noted that the freezing of price revisions likely removed the margin of Rs 2.5-3 per liter that the OMCs made on the sale of gasoline and diesel when prices reached $ 70 a barrel, but that the OMCs would have recovered the most of its losses from the recent drop in crude prices and that a price cut meant that its margins would have returned to normal levels.
Newsletter | Click to get the best explainers of the day delivered to your inbox
However, the central government has yet to reverse the increases in excise duties imposed on gasoline and diesel in 2020 to boost government revenue during the pandemic even though the price of gasoline and diesel is still close. from all-time highs. The central government had increased taxes on gasoline by 13 rupees per liter and taxes on diesel by 16 rupees per liter last year.
West Bengal, Assam, Rajasthan and Meghalaya are among the states that have lowered state tax increases on gasoline and diesel in February.
📣 JOIN NOW 📣: The Telegram channel Explained Express
Why are oil prices falling now?
Both rising crude supply and concerns about demand have led to the recent correction in crude prices, which had risen steadily from about $ 40 a barrel in late October to $ 70 a barrel in early March. . Crude oil prices have fallen on fears of new Covid-19 restrictions in Europe and increased US crude production.
Crude oil prices continued to rise between October and early March when the OPEC + group of oil-producing countries decided to continue production cuts despite crude prices reaching levels close to pre-covid and the United States. was hit by heavy snow storms in mid-February a sharp drop in US crude oil production. However, experts have noted that rising crude prices have accelerated the recovery of US crude supplies.In addition to this, a slow launch of vaccines in Europe has also contributed to concerns about a slowdown in the demand.
A move by India to cut oil imports from Saudi Arabia in response to the country maintaining production cuts despite India calling for production cuts to be lifted may also boost crude oil production in the US. , Which emerged as the second most important source of crude oil for India in February displacing Saudi Arabia.
.
