If prices stay high, consumers will have to pay more: MK Surana, HPCL
Oil marketing companies will have no option but to pass on the higher prices of petrol and diesel to consumers if the current surge in global crude prices sustains, says Hindustan Petroleumchairman MK Surana, quickly adding that he doesn’t think the price trends can go on for long. In an interview to ET’s Sanjeev Choudhary, Surana says the movement of crude, crack and exchange rate will decide the product prices.
How do you see sanctions against Iran impacting Indian refiners?
It’s early days and the full import of the sanctions would be clearer only with time. We will have to look at the nature of the sanctions, its modalities and the way it’s implemented. We have dealt with sanctions against Iran before, but this time it’s a little different. Europe is thinking differently. EU has several trade arrangements with Iran and that would have some bearing on the issue. For refiners, the most important thing is oil supply. There are alternative sources of supply available, so it shouldn’t be an issue for refiners though Iran does offer some freight concessions. During last sanction, the US didn’t export oil but today, it does. Last time, people grappled with the problem and slowly figured out some solutions. Those experiences would surely be useful this time.
Oil prices are rocketing...
There is no reason for crude oil to spike since there are enough global inventory though production in Venezuela and Libya have been dropping. Paper trading is substantially higher than physical trading now. Speculative trading will have to unwind at some point. Prices may cool down then. If you look at fundamentals, a price below $70 looks more reasonable than the current range of $70-80 a barrel.
A lot of effort went into paying Iran for supplies during the last sanctions. Would it be manageable this time?
The issue of payment depends on the nature of sanctions. Last time, reinsurance was a problem but we figured out a solution. This time, the EU is keen on getting things resolved. We need more details on the sanctions but think we will be able to find a payment solution this time round too.
Such a price surge means fuel prices in India too will have to go up sharply. We don’t think current price trends can go on for long. Yet, if prices were to stay high on a sustained basis, we will have no option but to pass on the hike to consumers. The movement of crude, crack and exchange rate will decide the product prices.
(Source: Economic Times) 13/5/2018