For much of June, several cities across the country have witnessed petrol pumps rationing supplies or shutting due to non-availability of fuel, leading to concerns about shortages and triggering panic buying among some consumers.
Why the shortage?
- As global crude prices increased and the value of the rupee fell simultaneously, OMCs such as state-owned IOCL, HPCL, and BPCL, and private companies, started to report losses on retail sales.
- As the losses mounted, downstream oil companies tried to reduce supply to petrol pump vendors, which resulted in fuel shortage at pumps in multiple states.
- The government blamed the scarcity of fuel on the surge in demand — the increase being as high as 50% in the first half of June 2022
- States that were seeing shortages were those in which large quantities were supplied by retail outlets belonging to private marketing companies, and where the distances from supply locations — terminals and depots — are larger.
- Some public sector oil companies also reduced supply to dealers to cut their losses by discontinuing the fuel on credit offered to pump owners, thus impacting their fuel lift. However, Indian Oil has continued with the credit system
- India has taken advantage of discounted prices offered by Moscow to ramp up crude imports from Russia at a time of surging global energy prices.
- The solution lies in raising retail petrol and diesel prices to ensure oil companies do not lose money.
READ MORE: Daily Prelims Booster
READ MORE: Daily News Analysis