Fuel price de-control: What does it mean for the customer?

Don’t expect any price wars, but it is time to start searching for more fuel-efficient vehicles

So what does the freeing of the fuel price mechanism really mean for us in India, on the street and at home, and where does this go next?

By all reckoning, it goes only one way, and that is straight up. A cynical way of looking at things would be that the cost of the cleanup of the Deepwater Horizon/BP oil spill in the US, and the resulting reduction in oil production as well as increased cost of future offshore drilling especially in the US, will cause a spike in crude oil prices worldwide-which will further notch up prices for fuel at the retail outlet in India. That's certainly the larger picture, and winter crude price predictions are touching three figures in dollar terms per barrel, again. Add to that all the predictions for inflation, worldwide, staring us in the face.

At the time of writing this article, the oil companies had not provided their dealers with any indications on what this would really mean in the future, barring the notified hike on the night of Friday, 25th June. Prices of petrol, diesel and kerosene at the retail outlet, as well as LPG and CNG, would continue to be "administered" by the parent company-chances of any price-wars at this level are totally ruled out. And the buzz with dealers is that public sector oil companies, who have an almost 100% presence and dominance in urban locations, are likely to form a "consultative committee" once again to "set" prices at their outlets.

The few private oil company outlets that exist in India are largely on the outskirts of cities or on highways, and it is not expected that they will go into any price-war or any sort of loss-making method to gain market share, as was done in telecom. They are expected to willy-nilly follow the larger public sector oil company pricing policies, and will hope to make better margins out of efficiency, as well as allied usage of retail outlets.

What may also increase is advertising spend and perception management. Beyond that, time to start looking at more fuel-efficient motor vehicles again, and on that, luckily, we seem to be moving towards a vast choice in all segments.

datar ashok
1 decade ago
right oil prices - i.e. higher prices should encourage users to be very efficient in its use. it will also give a chance to alternative sources of clean energy to develop. hence we must welcome the higher price.
there should be a cess of one rupee per litre on all oil products to prepare for a contingency fund for any calamity.
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