India is one of the world’s biggest oil consumers. Oil and natural gas (ONG) industry has a significant impact on the growth of the country’s economy and accounts for at least 15% of the nation’s Gross Domestic Product (GDP). Hence any significant change in the prices would give a big boost in reviving the economy.
Global oil prices, which were $28.34 on 3rd April 2020, continued to steadily decrease and reached $19.78 at close of 1st May, a steep 30% decrease !!!! within a month, notwithstanding the fact, that the price touched a historic low price of negative $ 37.63 on 20th April 2020. However, the petrol and diesel prices in India do not show any significant reduction. Diesel prices (ex-Delhi) continued to be around INR 62.29 in the past month. The story is the same with Petrol prices (ex-Delhi) too, as it continued around INR 69.59 in the past month.
However in the US, the retail gas prices which were $2.02 in the first week of April 2020, reduced to $1.87 (8% reduction) in the last week of April. Similar price reductions were noted in other developed markets like Germany, France etc
The price of oil influences the costs in manufacturing and allied industries across the country. There is the direct correlation between the cost of gasoline or airplane fuel to the price of transporting goods and people. A drop in fuel prices means lower transport costs and cheaper airline tickets. As many industrial chemicals are refined from oil, lower oil prices benefit the manufacturing sector
Given the steep decrease in crude prices and significant drop in consumption owing to the COVID pandemic, it would be good if the Diesel / Petrol prices are reduced to revive the economy. This reduction of costs could be passed on to the consumer. Greater discretionary income for consumer spending can further stimulate the economy. Especially in the post COVID economy, such drastic measures are the need of the hour.
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