India Caps Fuel Sales To Avoid Shortages

Submitted by Irina Slav of OilPrice.com

India has imposed limits on gasoline and diesel sales at retail fuel stations to avoid supply crunches, with commercial consumers banned from buying any fuel from retail stations, Bloomberg reported, noting there will be daily limits on diesel sales.

The diesel cap was set at 200 litres per vehicle or customer, with resale of the fuel forbidden, Reuters noted in a report on the news. Commercial users, meanwhile, will have to get their fuels from bulk sellers after their rush to retail fuel stations drained some of them. Fuels are cheaper at retail stations to shield consumers from the oil price shock.

The limits will be in effect for an initial period of 90 days, per the government order that instituted them. They can be canceled earlier, however, the document also said.

Since the war in the Middle East began and cut off over 40% of India’s crude oil flows, those that passed through the Strait of Hormuz, one of the highest-flying economies in Asia, have seen their oil import bill soar, investors fleeing the capital market, and the local currency plunging to an all-time low against the U.S. dollar.

As a result, the world's third-largest crude importer saw its wholesale inflation jump to 8.3% in April from a year earlier, significantly accelerating from 3.88% annual inflation in March, driving wholesale fuel prices higher. These surged in April, with gasoline prices up by 32.4% and diesel prices up by 25.19%. That’s up from a monthly rise of 2.5% for gasoline in March, and 3.62% for diesel. For May, inflation is seen rising by 4% as a result of the energy price surge, with wholesale inflation soaring by over 9%.

Because of the energy flow disruption, India ended a four-year freeze on fuel prices, hiking them four times in the space of a single month.