Govts will find it difficult to reduce oil prices because:
1. Oil refineries purchase crude 2 months in advance so there is a considerable lag which will be even longer because inventories will take more time to clear due to lockdown
(1/n)

2. Central Govt don’t meddle with day to day prices of oil, so it will pass on the benefits eventually. But it won’t reduce excise duty because its revenue projections from oil will be anyway lower due to 7-9% lower demand due to Covid disruptions.

3. State govts like Maharashtra & Weat Bengal have already increased their VAT on petrol/diesel in the middle of lockdown to mop up more revenues - we will see more state govts doing that due to reduced sources of revenue.

4. There is little hope that state govts would be in a mood to pass any excise cut benefits to end consumers. Remember that it is at the state level where we have seen maximum resistance to being petrol/ diesel under GST.

5. Every every political party knows that the marginal benefit of oil price reduction is minuscule as compared to marginal cost of increasing it. Therefore it is in their interest to keep price volatility low.

6. On a public policy front, it’s much better to spend the additional benefits from low crude prices in a targeted manner for the poor instead of sharing the benefits of lower prices with SUV guzzlers. (n/n)

This thread is for Congress folks who come to TV debates with zero elementary knowledge of oil markets and economics! Sorry, I can’t stand them a bit.

India has followed dynamic pricing based on trade parity prices (avg of refined products of a basket of intl prices, not crude price per se, hence the lag). It seems to have suspended this during the lockdown. Eg: Delhi prices are static at 69.59. It WILL reduce after we open up!