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For the first time since April, global benchmark Brent was hovering above $81/barrel on Friday. The market has received support from the International Energy Agency and OPEC, who predicted a recovery in demand in the second half. This was boosted by expectations that the US would hold off on interest rate hikes due to supply disruptions from Egypt and Nigeria, along with subdued inflation data.
Here, the rise in crude oil prices has prompted the government to re-impose windfall profit tax on domestic crude oil. It was reduced to zero in May as oil fell to the $70 per barrel level. Export taxes on refined products are also likely to come back or increase, as higher oil prices push up refining margins.
Market volatility has created a tough situation for state operated fuel retailers. Fall in oil prices has made petrol and diesel quite profitable from May 2022 at the current rates fixed. If they cut oil prices now and by the end of the year crude oil will go up further. Due to this, it will not be possible to increase the price of oil again due to assembly elections in the states.
WPI Inflation: Big relief! Wholesale inflation at 8-year low, see what became cheaper, full details
Industry officials argue that government retailers are not reducing petrol and diesel prices to make up for past losses. Alternatively, according to experts, a substantial cut in petrol and diesel prices ahead of the elections may do the government good. However, this will largely depend on some stability in the oil market.
Petrol and diesel prices have remained stable since May 22 last year, when the Center cut excise duty. This took the total cut for petrol and diesel to Rs 13 and Rs 16 per litre.
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