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🇳🇵 Nepal /Economy & Trade

Global oil prices tumble, but Nepal unlikely to see major fuel price cuts soon

From Kathmandu Post · () English

Summarized and contextualized by DistantNews.

At a glance

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  • International crude oil prices have fallen significantly, potentially easing Nepal's import costs and fiscal pressures.
  • Despite global price drops, Nepali consumers are unlikely to see immediate major fuel price reductions due to refinery constraints and high LPG demand.
  • Nepal Oil Corporation faces losses on LPG sales and continues distributing half-filled cylinders amid ongoing uncertainty in West Asia.

Global oil prices have plummeted to their lowest levels since before the Iran conflict began in February, offering Nepal a potential economic reprieve. This decline could ease inflationary pressures, reduce the country's import bill, and improve the government's fiscal outlook. The drop in oil prices followed an interim agreement between the US and Iran on June 17 to end their conflict and reopen the Strait of Hormuz.

We are hopeful that petrol, diesel and aviation fuel prices will come down slightly when the Indian Oil Corporation (IOC) sends its new price list. But it is too early to say by how much.

— Manoj Kumar ThakurDeputy director of the Nepal Oil Corporation, expressing cautious optimism about fuel price reductions.

However, Nepali consumers are unlikely to experience significant relief in fuel or cooking gas prices when the Nepal Oil Corporation (NOC) revises rates. Manoj Kumar Thakur, deputy director of the NOC, expressed hope for slight reductions in petrol, diesel, and aviation fuel prices, but cautioned that the extent of the decrease remains uncertain. The Indian Oil Corporation (IOC), Nepal's sole petroleum supplier, adjusts export prices fortnightly for petrol and diesel, and monthly for LPG and aviation fuel.

LPG prices are also unlikely to change because demand remains high while production is limited.

— Manoj Kumar ThakurDeputy director of the Nepal Oil Corporation, explaining the reasons for stable LPG prices.

Thakur explained that the sharp fall in crude oil prices has not directly translated into comparable declines in refined fuel prices because production has been constrained by refinery damage. Similarly, LPG prices are expected to remain unchanged due to high demand and limited production. The NOC is currently incurring a loss of Rs1,174 on every LPG cylinder sold, totaling approximately Rs36 billion monthly. Despite these losses, the corporation has settled all outstanding payments to the IOC.

The situation in West Asia remains uncertain.

— Manoj Kumar ThakurDeputy director of the Nepal Oil Corporation, commenting on the ongoing instability affecting supplies.

The policy of distributing half-filled LPG cylinders, implemented on March 12 due to fears of supply disruptions from West Asia, will continue. The IOC is currently supplying 80 to 85 LPG tankers daily, falling short of Nepal's requirement of at least 100 daily for normal supplies. The IOC has advised Nepal to maintain the current arrangement for another 10 days before considering a return to full-cylinder distribution.

They have advised us to continue with the current arrangement and wait another 10 days before deciding whether to resume full-cylinder distribution.

— Manoj Kumar ThakurDeputy director of the Nepal Oil Corporation, relaying advice from the IOC regarding LPG distribution.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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