Date:12/04/2006 URL: http://www.thehindubusinessline.com/2006/04/12/stories/2006041203840100.htm

Back Domestic firms worried as global oil prices test $70 levels

Our Bureau

New Delhi , April 11

The surge in international crude prices has become a cause for concern for the domestic oil companies, which are already reeling under pressure.

The international crude prices were seen surging towards $70 a barrel, with the London Brent touching the highest ever figure of $69.60 and the US crude close to $70. The prices have risen by 13 per cent since January.

Besides, the US crude futures for delivery in June and later are ruling above $71, which suggests that most traders do not expect prices to fall.

Reacting to this surge in international crude prices as well as the Indian basket closing at the highest ever level of $64.8 on Monday, senior Petroleum Ministry officials said that the situation was serious and was going from bad to worse.

Close watch

The Ministry, on its part, is keeping a close watch on the situation.

The oil marketing companies are of the opinion that if the situation continues, it would impact their bottomlines more severely. Therefore, these companies want the Government to take a serious view on the Rangarajan Committee Report at the earliest.

They have also stepped up their demand to increase domestic retail prices of petroleum products.

Even the country's biggest explorer, ONGC, has said that the situation is disturbing, both for the company and from the national perspective. The surge in crude prices would also result in the higher subsidy sharing, a senior company official said.

Airliners worry

According aviation industry sources, every one percentage point increase in international oil prices would result in an increase of about Rs 8-9 crore in the fuel bill of most global airlines.

Any further northward movement in prices would considerably affect the bottomline of most carriers unless they resort to fuel hedging. India's oil import bill went up to $43.84 billion in 2005-06, up from $29.85 billion the previous year.