The crude oil price crash has come at an inopportune time for the energy-hungry and import-dependent Asian economies, particularly India.
The slide in crude oil price may provide marginal relief, but it is no match for the debilitating economic impact of the coronavirus. It could, thus, end up being a lost opportunity as it is unlikely to spur consumption.
Economic uncertainty is a huge dampener on spending. India not ready with its strategic storage infrastructure, missed the opportunity to fill its storage with cheap oil.
Overall, the cheap oil this time also comes with huge uncertainty — the OPEC+ alliance could get back on track. So, it is going to be hard for countries to plan their spending based on today’s prices.
Indian Strategic Petroleum Reserves is responsible for building buffers.
Currently, it has 5.33 million tonnes of underground strategic reserve facility in Visakhapatnam, Mangaluru and Padur (Karnataka), while another 6.5 mt facility is coming up at Padur and Chandikhole (Odisha).
Work on two more facilities — at Bikaner in Rajasthan and Rajkot in Gujarat — will be initiated soon.
There is growing demand to pass on the benefits of the low crude prices to the common man, by reducing the retail rates of petrol, diesel and cooking gas.
In dollar terms, the international crude oil prices are down to the level of 2004 November, when petrol, diesel and LPG were available at Rs 37.84, Rs 26.28 a litre, and Rs 281.60 per cylinder, respectively.
For the last six years, the government and oil marketing companies have been making huge windfall gains amounting to lakhs of crores per year.
The government has raised central excise duty by 218% on petrol and 458% on diesel since May 2014.
The consumer would certainly want the duties — which account for the major portion of retail price — reduced and pump prices lowered. But the government would prefer to raise them to maximise revenues.
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