Petrol price set to hit Rs 100 mark! Check oil-rupee-dollar equation that will deliver shock to consumers

Another $10 rise in crude oil to $95 per barrel at rupee level of 73-74 may take petrol price in India to Rs 100 per litre, according to the back-of-the-envelope calculations by analysts.

The benchmark Brent crude price surged to four-month high of $85 per barrel on Wednesday when a litre of petrol was sold for Rs 91.20 in Mumbai and diesel for Rs 79.89 per litre.

Abhishek Bansal, founder and chairman of currency derivative and broking firm ABans group, said if rupee rises to 75 a dollar and Brent remains at $85 per barrel, then petrol and diesel price may be in the range of Rs 91-95 per litre and Rs 80-84 per litre, respectively, in India.

"If the Brent price surges to $90/barrel and rupee stays at the current level of 73 per dollar, we could see petrol and diesel being sold in the same price range of up to Rs 95 per litre and Rs 84 per litre, respectively," said Bansal.

"In any of the scenarios, there is going to be a negative impact on our economy which will be burdened with additional imports costs, and further depreciation of rupee and rise in fuel cost looks unavoidable. Consumers can get relief only if government takes the charge and reduces some taxes on petrol," Bansal said.

The double whammy of rising crude oil prices and falling rupee is likely to intensify as clock ticks towards November 4 when the US re-sanction on Iran will come into force.

Refiners and analysts claim that with 1.5-2 million barrel per day (mbd) exports of Iran likely to go out of market, it will not be a surprise if crude touches $115-125.

"We will get a clear picture on this by mid-November or early December when the quantity of oil availability with Saudi Arabia, Russia and other oil-producing countries gets clear," said a Delhi-based analyst. " If the Iran crude cut reaches two mbd then it will be a real tight situation," the analyst said.

While Korea and Japan have already halted their Iranian crude purchase, China and India also followed by cutting future imports. Sources claim that Indian refiners have purchased most of its oil requirement from Iran during earlier months of this year, and are not likely to make further purchase with the approaching deadline.

D Rajkumar, chairman and managing director of government-owned BPCL recently told DNA Money that his company is waiting for the outcome of the government level talks that are at present going on with the US.

As per the data with the industry, India's CAD expanded to $15.8 billion or 2.4% of GDP for the Q2 FY18-19; it may further rise towards 2.8% of GDP in FY18-19. In 2008 when the average price of Brent was around $120 per barrel the Indian crude basket was costing around Rs 5,000-5,500 per barrel while now it costs Rs 6,000-6,500 per barrel.

Source: DNA Money