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Fuel prices may fall as oil hits $40


  • International Crude Oil prices slid towards the $40 barrel mark, amid growing worries about the health of the Chinese economy, and raised the prospects of a fresh round of cuts in kitchen and auto fuel prices in India in the coming weeks.
  • Although US oil prices headed towards the eighth consecutive week of fall on Friday — the longest losing streak since 1986 — a weakening rupee could wipe out some of the gains.
  • The sharp slide in oil prices also spells good news for government finances since it reduces the outgo on subsidy and leaves more money for allocation to other welfare programmes.
  • Lower prices also mean healthier margins for the corporate sector and the broader economy as it reduces price pressures. The impact on prices will create the headroom for the central bank to cut interest rates at a time when economic revival has been slow.
  • The oil ministry’s market tracker, Policy Planning and Analysis Cell, estimated the country’s oil import bill for this fiscal at $88.2 billion, or nearly 22% lower than $112.7 billion in 2014-15. Again, this will shrink further in line with falling crude prices.
  • While the supply side remains surplus, hopes of revival in demand in the immediate future remain distant in the absence of a strong and widespread indication of economic activities picking up in major economies.

Source: ET

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