Oil Prices Are At Its Lowest This Year But Your Fuel Bill Won’t See Any Change. Here’s Why

Reasons like the decline in demand, slow economic growth across the globe and fading concerns around Russia's invasion of Ukraine can be attributed to this decline in oil prices.

New Delhi: The prices of crude oil in the international markets are at their lowest this year as it is trading near $76 a barrel, a sharp decline from $129 in March. Reasons like the decline in demand, slow economic growth across the globe and fading concerns around Russia’s invasion of Ukraine can be attributed to this decline in oil prices. However, domestic users in India won’t benefit out of this and will still have to shell out the same amount of money for their purchases.

First, let’s understand in detail why oil prices have come down so drastically.

Decline In Demand:

• Sharply slowing global economy
• Recessionary fears in the developed world
• Further monetary tightening as inflation remains elevated

Fears over Russian supply issues have waned

• Russian production is almost back to the pre-war level
• $60 per barrel cap imposed by the West is seen as too high and unlikely to disrupt Russian oil exports

Covid Surge In China

Lifting of severe Covid restrictions should aid demand recovery, but there is concern infections may rise as a result.

Why Domestic Users’ Fuel Bill Won’t Reduce

Though oil prices are governed by international markets yet the pimp bills in India won’t see any reduction as the Indian companies were selling fuel below market rates and incurred big losses. Domestic companies will likely first recoup their losses before they pass on the benefits of a global price decline to consumers.

The reduction of fuel prices in the international markets will bring key benefits to the Indian economy as the import costs for fuel will reduce and it will also ease inflation. This will also strengthen the rupee and reduce pressure on RBI to hike interest rates.