Oil record biggest weekly decline since 2020:Will petrol and diesel become cheaper in India?

Crude oil has suffered its biggest weekly decline since 2020, falling more than 16% last week. It is currently trading near $97 a barrel. Oil prices had reached a six-month high at the end of October, but have since seen some relief. According to market analysts, hopes have grown that the military conflict in the Middle East will not escalate significantly following Donald Trump’s party’s defeat in the US midterm elections. Rising expectations of a diplomatic solution have helped bring prices down. However, uncertainty prevails. Crude fell 24% in one week in 2020 The situation in the Middle East has not fully calmed Scattered attacks are still continuing in the Persian Gulf and other parts of the Middle East. According to UK Maritime Trade Operations, an oil tanker passing through the Strait of Hormuz has been attacked. Meanwhile, Iran-backed Houthi rebels in Yemen targeted Saudi Aramco offices in Riyadh. In response, the army of OPEC member Saudi Arabia destroyed two missile launchers. Three key figures for the crude oil market will be released in the coming days Impact on India when crude becomes cheaper or more expensive India imports around 85% of its total crude oil requirement from abroad, so changes in its price affect the country’s economy. 1. When crude becomes expensive, petrol and diesel become costlier When crude oil becomes more expensive in the global market, India has to pay more dollars to buy it. This increases the country’s import bill and current account deficit. If crude oil becomes extremely expensive and remains so for a prolonged period, oil companies raise petrol and diesel prices. As soon as diesel prices rise, freight costs increase, making vegetables, fruit, groceries and other essential goods more expensive in the market. 2. When crude is cheaper, petrol and diesel become cheaper When crude oil prices fall, it becomes cheaper for India to import oil. This conserves the country’s foreign exchange reserves and reduces the financial pressure on the government. As oil companies’ costs fall, fuel prices may remain stable or decline. Cheaper transport helps keep the prices of everyday goods under control. The country’s inflation rate falls. What immediate impact will this have on petrol and diesel prices in India? Whether petrol and diesel prices fall immediately in the domestic market depends on whether government-owned oil companies have recovered their past losses. However, if Brent crude remains in the $95-98 range or below for an extended period, the oil companies’ refining margins will improve. This could pave the way for a reduction of ₹2 to ₹4 per litre in fuel prices in the coming days.