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Friday, June 15, 2012

Strait of Hormuz - possible rate cut in petrol in India

You need not be a owner of a car [petrol driven] to worry about the rise in petrol.  In Chennai, it was less than Rs.70/- before 2012 dawned, went to Rs.77.53 per litre in end May 2012, marginally reduced to around Rs.75.40 now – there is expectation of more relief as oil marketing firms are expected to cut petrol prices by up to Rs 2 per litre  today, due to falling international crude prices. Crude prices, which fell to $96.5 per barrel on Wednesday, the lowest level in the last one year, have provided enough legroom for the oil firms to reduce petrol prices.   The State owned marketing firms are to meet today to decide on the quantum of reduction in petrol prices to be passed on to consumers.   There is scope for some reduction due to fall internationally in the prices of crude oil – not due to any concern for the common man or any good move by the President aspirant FM.

The changes are necessitated by happenings elsewhere – nautical miles away at the  Strait of Hormuz, a narrow passage connecting the Persian Gulf to the Arabian Sea, surrounded by countries like Saudi Arabia, Iran, UAE, Iraq and Oman.  This is the most happening place in oil trade as  about 17m barrels of oil produced in the Middle East gets transported through the Strait.  Its narrowest point is vulnerable with the threat of Iran – a blockade in the strait would mean  halt to 17 million barrels of oil passing through it.  For reckoning it could well be one fifth of  world's oil would stagnate, which sure would cause spiraling inflation of oil prices.  

There have been many concerted efforts -  European Union has placed an embargo on Iranian oil imports, and some sanctions on the central bank; US is moving a bill imposing new sanctions on Iran under the National Defence Authorisation Act.  US perceives Iran as having insatiable urge for nuclear weapons.  Iran maintains that they are intended for peaceful purposes !  Those possessing nuclear weapons, would not want others to possess the same and US would ensure that India purchase oil from Gulf in dollars – again a conundrum !   With tensions escalating, Iran revolting against sanctions is threatening to block the strait.  In anticipation, the aircraft carrier USS Abraham Lincoln has entered the Persian Gulf escorted by six British and French naval forces. A War or threat thereat would not only affect the warring Nations but also others as supply of oil would get affected leading to increase in prices again.

You sure have heard this Indian politics – some politicians would always reel out statistics of neighbouring States to justify any hike in their own yard – in what could make Pranab da feel comfortable, there is news of  Kiwis' quality of life is being hit by the high cost of fuel, a new survey shows. quoting  Financial research and ratings agency Canstar Blue's monthly survey of 2,500 New Zealand consumers reports that  nearly 70 per cent are being affected by high fuel prices.  Ironically, the survey was released just after petrol prices were cut for the third time in just over a week - but they still remain historically high. Regular unleaded petrol is now around $2.059 a litre [approx Rs.90].  The survey found the use of public transport is up, with 21 per cent of respondents now saying they're leaving their cars at home, and 38 per cent said they wait until the fuel light has been on in their vehicles for at least a day before filling up.  Nearly 60 per cent say they sacrifice convenience for price when buying fuel. There are reports of reduction – now  BP has  cut 3 cents from the price of regular unleaded petrol, taking the price at sites controlled by the company to $2.059. Diesel prices were cut 2c to $1.459.  BP’s MD is quoted as stating that the market remained uncertain but the benefits of downward trend in international product prices is being passed to the end consumer.  

With regards – S. Sampathkumar.

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