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Global decline in oil price fails to benefit Nepali consumers

   March 11, 2020        294        The Himalayan Times

Kathmandu- The plummeting global crude oil price in recent weeks has failed to benefit Nepali consumers as the government is reluctant to cut down the price in line with the international market.

Brent crude, the international standard, lost $11.44, or 25.3 per cent to $33.83 per barrel while the benchmark United States crude fell $10.77 or 26.1 per cent to $30.49 today. Oil prices are plunging amid concern a dispute among producers could lead a global economy already weakened by COVID-19 to be awash with an oversupply of crude.

Similarly, Saudi Arabia’s decision to slash prices and set plans for a big increase in crude production in April also contributed to the oil price coming down. The price cut added further uncertainly to global markets already roiled by the coronavirus. Moreover, there has been

analysis that the crude oil price could come down to as low as $20 per barrel.

However, the Nepali market is yet to benefit from the recent decline in price of oil in the international market and the state-owned Nepal Oil Corporation (NOC) is in no mood to bring down prices anytime soon. Instead, the government has recently decided to raise infrastructure tax on fuel by five rupees per litre to Rs 10 which will indirectly be adjusted in the retail price of fuel though state agencies claim that the raised tax on fuel will not affect the retail price of

petroleum products.

Though officials at NOC accept that fuel prices have been coming down in recent weeks, they are not in a position to adjust fuel price immediately. “The government has adopted automatic fuel pricing mechanism which has a provision to review fuel price fortnightly (every first and 16th day of a month of the English calendar). If the price continues to plummet, necessary adjustment in price will be made on March 16,” said Birendra Goit, spokesperson for NOC.

NOC officials also said that the change in global oil price will not immediately affect Nepali market as Nepal imports fuel from multiple refineries of Indian Oil Corporation (IOC) in India. “We adjust price in line with adjustment made by IOC in price for Nepal,” he said.

Meanwhile, consumer rights activists have charged that the automatic fuel pricing mechanism was introduced to benefit NOC and not consumers. “NOC is making millions of rupees of profit every fortnight while consumers are obliged to pay higher price. The trend of raising fuel price immediately when fuel rate goes up in the international market and being reluctant to slash price amid global fall in oil price is anti-consumer activity,” said Prem Lal Maharjan, president of the National Consumer Forum Nepal.

The Himalayan Times