The soaring fuel prices in India have reached an all-time high, creating a stark contrast when compared to global market trends. The worst part is that, unlike other markets where there is sometimes a dip in the fuel price, it does not happen in India at all.
There are several factors contributing to rising fuel prices in India, leaving many people wondering if there will be any relief soon. Predicting when fuel prices will eventually fall has proven to be extremely challenging, plagued by uncertainties and numerous factors that influence the pricing dynamics.
Factors That Can Contribute to Drop in Fuel Prices in India
Several factors can contribute to a drop in fuel prices in India. Understanding these factors is crucial in assessing the potential for a decrease and its possible impact. Here are key factors that can influence fuel prices in India:
Dip in Crude Oil Prices
One of the major sources of fuel in India as well as anywhere globally, is none other than crude oil. However, in most cases, crude oil is so expensive that this is one of the major reasons why fuel prices in India are also high.
Many factors, including global demand, geopolitical changes, production levels, and OPEC decisions, affect the price of crude oil. Reduced demand owing to economic slowdowns, a surplus on the market, geopolitical stability, or increasing oil production can lead to lower global crude oil prices.
When global crude oil prices decrease, it can directly impact fuel prices in India. This is because Indian oil marketing companies purchase crude oil from global markets, and the price of importing crude oil is a significant factor in fuel pricing. If the cost of importing crude oil decreases due to lower global prices, it can lead to a drop in fuel prices in India.
Global Oil Prices
India is one of the few countries that heavily rely on oil imports from global sources due to its limited domestic reserves and the fact that it does not have any oil mines. Although India has been exploring and developing its oil and gas resources, both onshore and offshore, its reserves are relatively modest compared to other oil-producing nations.
Hence, if the price of fuel globally is high, it is unlikely that fuel prices in India will go low. However, a recent report stated that global oil prices may decrease if the inflation rates decrease slightly. This news brings hope to those eagerly awaiting a reduction in fuel prices in India, considering the significant rise they have witnessed.
Production and Supply
India heavily depends on imported crude oil to meet its domestic fuel needs. India's insufficient domestic crude oil production implies that imports are required to provide a sizable portion of the nation's fuel needs.
A nation becomes more vulnerable to changes in geopolitical conditions, currency exchange rates, and global oil prices when it depends heavily on imports. However, if India's domestic crude oil production rises, there will be more production, lowering the fuel price in India.
Also, if the Indian government taps into its strategic petroleum reserves during periods of high oil prices, it can help stabilize the domestic fuel market and potentially reduce prices.
Besides, India has a significant refining capacity, and any increase in refining capacity or higher utilization rates can help meet domestic demand more efficiently and potentially lead to lower fuel prices.
Dip In Exchange Rates
A lot of people already know that it is the US market that exports oil globally. This is one of the major reasons why the dollar exchange rate is very important in deciding prices. India has to pay a very high exchange rate, which is the primary reason behind the fuel price rise.
If the GDP of India sees growth and the Indian rupee goes stronger against the dollar, then the fuel price in India will come down. There are a lot of experts who think that if the Indian rupee can fight the battle, then it will have a major impact on the fuel price and bring it down drastically.
And finally, the Indian market is probably one of the few markets where there are a lot of competitive sources when it comes to sourcing oil. Companies like Indian Oil Corporation, Bharat Petroleum, Reliance, and Hindustan Petroleum are mainly responsible for the distribution.
These companies compete with each other for market share. Increased competition can sometimes lead to price reductions as companies try to attract customers by offering competitive prices.
It is extremely hard to suggest when the fuel price in India will go down because it depends on an amalgamation of factors. It is estimated that there will be an all-time high surge in fuel prices in the upcoming few months, following which there will be a dip.
If you want more updates on the fuel price in India and when it can go a possible down surge, download the Park+ app. The app is extremely easy to use; you will get all the real-time information with one click.