The recent surplus oil supply had resulted in considerable drop in cost of oil. To curtail dropping prices, Organization of the Petroleum Exporting Countries (OPEC) decided upon cutting down production to raise prices. Its members include largest oil producers such as Saudi Arabia, Iran, UAE, Kuwait, Algeria, and Venezuela. The cut in production will begin from January 2017 onwards and the OPEC plans on cutting down 1.2 million barrels on a daily basis.
OPEC has last cut down on production way back in 2008 citing financial losses. With the current quantity planned for cut, the total output will now stand at 32.5 million barrels per day. A CRISIL report indicates that the global crude price will remain between $50 per barrel and $55 per barrel for first half of 2017. The report further reveals that that petrol prices might rise by 5-8 per cent and diesel might cost dearer by 6-8 per cent.
Fuel prices in India are deregulated and are linked to the market rates. Hence, the oil marketing companies in the country revise their prices on a fortnightly basis depending on dollar rates and global oil rates. The companies also consider their margin before releasing the final price to end consumers. If the prices are hiked, as against a current petrol price of Rs 66 per litre in Delhi, consumers will have to later pay around Rs 71 per litre, while diesel might cost around Rs 59 per litre as against the current price of Rs 54 per litre.
