Petrol Diesel Price: Good news for common people. If all goes as predicted, there may be a decline in petrol and diesel prices in the near future. Mark Matthews, the Managing Director of Julius Baer, a prominent wealth management firm in Switzerland, anticipates that crude oil prices could drop to approximately $60 per barrel soon. Sujan Hajra, the Executive Director and Chief Economist of Anand Rathi Financial Services, shares this view. Presently, due to tensions in the Middle East, Brent crude is trading at $91.16 per barrel and WTI at about $84.92.
Reasons behind the expected drop:
– Experts believe that there is a substantial hidden supply within the global oil system, with major Gulf producers like Saudi Arabia, Iraq, and Kuwait having the capacity to increase production.
– Once geopolitical tensions ease, oil supplies from countries such as Iran and Russia could also return to the market.
– If the situation in the West Asia region stabilizes, resulting in normalized shipping routes, a significant decrease in crude oil prices could occur.
Implications of sustained low oil prices:
– If crude oil prices hover around $60 for an extended period, OPEC+ might reduce production, and high-cost oil producers may cut back on investments, leading to a decrease in supply and a subsequent price increase.
– The oil market is known for its unpredictability, with reactions to macroeconomic or geopolitical events depending on various factors like inventory, capacity, and market sentiment.
Impact on the common man:
While there will be benefits for the common man in India from the expected drop in crude oil prices, the decrease in retail fuel prices may not be as significant. The process of converting crude oil into petrol or diesel involves refining costs, marketing expenses, margins, and taxes, which affect the final price at the pump. India heavily relies on imported crude oil, so a decrease in oil prices would alleviate pressure on the import bill and current account. This could strengthen the rupee, lower inflation, and enhance corporate margins.