Crude oil has been on a declining trajectory since last June when it reached $124 per barrel. For the last four months, prices have stayed below $90. But a rising concern about the health of the global economy in the wake of the collapse of a few banks in the US and Europe in recent weeks has triggered a sharp fall in oil prices.
The price drop has been too dramatic, and one can’t be sure if it’s going to stay this way for long, said Sunil Kumar Sinha, principal economist at India Ratings and Research. “But if prices stay low for long and its benefits percolate down to the real economy, it will make central banks less aggressive on rate hikes.”
Refineries also need more time to be sure if lower prices would endure, executives said. Lower prices will bring down costs for refiners, but benefits are unlikely to be passed on to consumers quickly. “The government will allow companies to first recover the losses they incurred last year,” said Sinha. Retail fuel prices have remained frozen since April, with companies selling below international rates for much of last year.
