Fuel prices are expected to come down in the coming cycle: HPCL Chairman

Hindustan Petroleum Corporation Chairman and Managing Director M K Surana talks to Shine Jacob on the global scenario and the home market. Edited excerpts:

There were concerns after the attack on Saudi Aramco, on pricing and supply. What is the status?

The way it is right now, I’d say it has been managed well. Crude (oil) prices have also come down to $58 a barrel. Initially, there was a perception in the market that this was going to be a crisis. But, the way Saudi (Arabia) dealt with customers as a country and as government is a good thing. Our government also acted immediately. The way we understand is that they are already back to pre-production levels. They made a commitment of supply even during this period; this augurs well for our relationship and their own credibility in the system.

It is no longer a unipolar world; we have a diversified crude (oil) basket. Otherwise, we will not be able to come out of such a crisis. In addition, with the US-China trade issues, people were thinking this will disturb the market but it did not escalate. Supply-side worries, which came all of a sudden, have subsided. The demand-side triggers have not created any misbalances. I think all these had an impact in calming of crude prices.

Is this demand-side decline mainly because of slowdown in the (global) economy?

Globally, there are demand-side worries. Even if demand in India is less than our expectation, it is better than in the rest of the world. To that extent, that advantage will continue. I think the government has taken adequate measures to deal with it. Some clarity on the electric vehicle front has come; further clarity is needed, so that perception related issues can be avoided. For example, some who could have purchased a vehicle would have thought about waiting for some time. Some producers would have gone slow on capacity expansion. I think, slowly, these issues will be solved.

Do you see any recovery in petroleum product prices?

Product cracks are firming up, while there is a softness in crude prices. Product prices will be a sum of crude prices, cracks and exchange rates. Fuel prices are expected to come down in the coming cycle.

(The) Ujjwala (scheme) turned out to be a huge success. What is next on liquefied petroleum gas?

The new connections will reach a saturation level after some point of time. It is already above 90 per cent and will reach 100 per cent. So, the aggressiveness we saw in the market since May 2016 till now cannot continue. The question that could come now is, how many will have double connections? That will be one focus. Second, with usage of LPG getting increased, the number of refills will also increase. We definitely have room to grow in LPG but it needs to be seen whether that will be at the same pace as the past two years.