The pandemic of novel coronavirus disease in China has dealt a blow to the international crude oil prices, proving a blessing in disguise for the economy of India. The price of oil has fallen by 20% and the price of liquid natural gas (LNG) has reached a record low.
Whereas oil and gas producers have been forced to reduce prices, this opens an opportunity for Indian companies and end consumers. Petrol and diesel are constantly getting cheaper as the price of crude oil is decreasing, leaving Indians with more money for other expenses.
On 7 January, China announced an outbreak of the coronavirus when the disease it caused had already crossed the threshold of an epidemic and turned into a pandemic. Since then, the price of crude oil has fallen by 20%. Now crude has reached the level of $ 55 per barrel, a drop of $ 13.
The LNG price has come down to $ 3 per mmBtu in a month. China is returning shipments, causing traders to seek other markets.
Crude oil cheaper, benefit to Indian economy
- Due to cheaper crude oil, the customer will spend less on petrol and diesel, which will save more money in his hands for other expenses.
- Low prices of crude oil are good in terms of current account deficit, rupee and inflation rate.
- Refiners can increase fuel prices to recover investment made in BS6 upgrade.
- The subsidy on fuel is expected to decrease.
- Government can raise duty to increase income.
- LNG terminal operators can store cheap gas and sell it later, taking advantage of lower prices.
One month of coronavirus, and the prices of petrol and diesel have plummeted. Petrol prices have fallen by more than Rs 3 since 7 January while diesel prices have also come down by about the same margin.
JP Morgan believes that the average crude oil price for the year 2020 will be $ 60.40 per barrel. This estimate is $ 4.1 lower than the previous one.
OPEC, Russia and others are contemplating a reduction in production. They are considering cutting 6,00,000 barrels per day production.