How Will US Oil Price Crash Impact India?

On Monday the United States crude oil prices plunged below zero due to the fall in demand for energy fuels caused by the coronavirus pandemic. According to a report by news agency Reuters, the Indian shares fell sharply on Tuesday following the crash of oil prices in the US. But the state-controlled oil marketing companies have also not changed the prices of petrol and diesel in the country and it has remained unchanged for over 35 days.

(FILES) In this file photo pump jacks draw crude oil from the Long Beach Oil Field under Discovery Well Park in Signal Hill, California, on March 9, 2020. - The US benchmark crude oil price sank to its lowest level ever on April 20, 2020, falling below $5 a barrel amid an epic supply glut and the coronavirus pandemic's hit to demand. After twice beating the record low, dropping to $4.04, West Texas Intermediate (WTI) for May delivery had recovered slightly at about 1720 GMT, and was trading at $5.18 a barrel in New York. (Photo by DAVID MCNEW / AFP)

On Monday the United States crude oil prices plunged below zero due to the fall in demand for energy fuels caused by the coronavirus pandemic. According to a report by news agency Reuters, the Indian shares fell sharply on Tuesday following the crash of oil prices in the US. The report said that NSE Nifty 50 index fell 2.85% to 8,999.95 by 0355 GMT, while the benchmark S&P BSE Sensex was down 2.84% at 30,747.13. The US oil crash was a result of various factors and at the top of the list was the change in consumption pattern due to the pandemic. Oil producers were forced to pay buyers to take the glut of crude oil, which was tough for them to store, as rising stockpiles of crude oil loomed in oil storage facilities. On the US stock market front, investors bailed out of the May contract ahead of expiry on Monday because of a lack of demand for the actual oil. The fall in US crude oil could also be attributed to the recent output cut agreement between the Organization of Petroleum Exporting Countries (OPEC) and its allies. Reports by PTI say that an agreement between top producers to cut output by 10 million barrels a day was also having very little impact as people continued to stay home due to the pandemic and restrictions on travel have not been lifted. But while the sudden crash was surprising, crude oil prices have been low for a while now. According to a report by the Economic Times rupee depreciation and an increase in taxes by the Central government in March means that consumers may not gain much from global low crude oil prices. The report also said that fuel retailers are making a margin of Rs 13 per litre but since the demand is low due to the lockdown it may not turn into a profit. According to other reports state-controlled oil marketing companies have also not changed the prices of petrol and diesel in the country and it has remained unchanged for over 35 days. India also planned to take advantage of the low prices and in March had decided to fill its Strategic Petroleum Reserve by buying from Saudi Arabia and the United Arab Emirates(UAE). And on April 14, a report by Reuters says that India planned to fill its reserves by the third week of May.