Coronavirus outbreak: Petrol, diesel set to get cheaper as crude oil hits 13-month low

NEW DELHI: Domestic rates of petrol and diesel, down about Rs 4 a litre since mid-January, are set to decline further as crude oil slumped to a 13-month low on Thursday to about $52/barrel on fears that the coronavirus outbreak may take a heavy toll on global economic growth and oil demand.

Petrol is down Rs 3.74 a litre and diesel Rs 4.41 a litre since mid-January. In Delhi, petrol was priced at Rs 71.96 and diesel Rs 64.65 a litre on Thursday.

State fuel retailers take 15-day moving average of international rates of fuels and factor in the exchange rate to calculate domestic prices of petrol and diesel daily. Fuel rates largely follow crude oil trajectory. Crude oil has tumbled 12% in eight days as several cases of coronavirus emerged from many countries.

Oil is down a quarter since the beginning of the year.

Falling oil prices are good for heavy energy consumer like India that imports 85% of its oil needs. Lower oil prices help keep inflation in check, reduce fuel subsidy, cut current account deficit and leave more resources in the hands of the state for public spending.

“For now, what we know for sure is that the month of February will record the worst oil demand contraction since the Great Recession. We also know that global aviation will be hit very hard across Asia and take months to get back in shape,” S&P Global Platts Analytics said in a report.

“In addition, we are aware that our best-case scenario-a V-shape recovery we last saw during the SARS-2003 outbreak-is already unachievable due to China’s inability to go back to ‘business as usual’ at the beginning of February, and we project it will take another month for full normalisation.”

Coronavirus cases have jumped within and outside China. The US reported first such case while Germany, Italy, Japan, Korea, Greece and Iran reported a rise in such cases. Pakistan and Brazil too have detected such cases.

Japan has ordered closure of all schools to stop the spread of virus while Saudi Arabia has halted religious visits. Governments and organisations have postponed several events while companies have begun warning of impact on earnings.

Goldman Sachs has warned that US companies will generate no earnings growth in 2020 if coronavirus becomes widespread.