Petrol, diesel price hike expectation leads to hoarding, surge in sales

Petrol and diesel demand has surged in India in the past few days and has gone past the pre-pandemic levels as consumers rush to fill up tanks in anticipation of a major hike in fuel prices due to the ongoing war between Russia and Ukraine. In the first two weeks of March, since the assembly polls ended in five states, people have been topping up as reports claimed around ₹12-15 hike in petrol and diesel prices, which have remained static for nearly five months since excise duties were cut to provide relief to customers.

Indian oil companies said that sale of petrol was at 1.23 million tonnes during the first two weeks of this month. It is nearly 18 percent higher than the same period last year and nearly 25 percent higher than in March 2019. On the hand, diesel saw its sales jump nearly 24 percent year-on-year to 3.53 million tonnes. It is more than 33 percent higher than what the most-used fuel in the country sold in March, 2019. Diesel sales in first half of March is also the most in the first two weeks of any month in the last two years and more than the total volume of diesel sold in April 2020 when the country was under a complete lockdown.

According to industry sources, the reason behind rise in demand of petrol and diesel has been reports of a possible hike in fuel prices due to surge in international crude oil price. Brent crude oil prices had touched a 14-year high of $139 per barrel last week since Russia invaded Ukraine. With no signs of any immediate ceasefire, this led to spike in international oil prices. Matters worsened after world's largest oil importer China also reported resurgence of Covid-19, raising concerns about major impact on oil demand.

India, world's third largest importer of crude oil, relies heavily on oil imports to meet about 85 per cent of demand at home. India's oil companies have been losing about ₹12-13 a litre on sale of petrol and diesel since excise duties were slashed in November last year. Reports suggested a hike between ₹10 and ₹15 per litre on petrol and diesel. It was anticipated that once the elections are over, state-owned fuel retailers will start adjusting the prices, which was as much as ₹12 a litre below cost.

Oil Minister Hardeep Singh Puri had said that fuel sales had jumped 20 per cent on comments exhorting people to tank up in preparation for an imminent hike in petrol and diesel prices. "On 5th March, a political leader made a statement, saying, fill up your tanks quickly because petrol prices are going to go up as elections are over. And the consumption went up by 20 per cent," Puri said in Rajya Sabha referring to a statement by Congress leader Rahul Gandhi. "It is a matter of shame that one statement led to hoarding of 20 per cent."

"Oil marketing companies will take their decisions (on fuel prices). They will proceed once they can no longer bear it. If they don't have the margin or cushion, they will take the appropriate step," Puri had said.

As of now, there seems to be no hint at petrol and diesel price hikes after the international oil prices fell below the $100 mark on Tuesday. The Centre has also assured that it is keeping a close watch on the ongoing Russia-Ukraine war and its fallout to make 'calibrated interventions' to keep petrol and diesel prices under control.