Understanding the July Natural Gas Price Hike
How the Israel-Iran Conflict Affects Your Gas Bill
New Delhi: The government has increased the price of natural gas. This hike impacts gas from fields operated by ONGC and Oil India Ltd. The new price is $6.89 per unit for July, up from $6.41. This change is due to the Israel-Iran conflict, which has caused oil prices to rise.
Price Cap Limits the Increase
The actual price increase is limited. It will only rise by 34 cents, or 5%. This is because of a price cap set at $6.75 per unit. The new rate starts on July 1, as per a recent government notice.
Who Does This Affect?
Legacy gas is used by:
- City gas networks for CNG and PNG supply
- Fertilizer manufacturers
This increase will impact the profits of CNG operators. These operators rely on legacy gas for 40-50% of their needs. However, it’s unclear if they will raise CNG rates for consumers. They might wait for the next gas price review, especially as crude prices are falling. The fertilizer sector will not be affected due to government subsidies.
Recent Gas Price Trends
Last month, the gas rate fell below the ceiling. This was the first drop in two years. It happened because oil prices were low in May. Before that, the rate had stayed at the ceiling despite higher notified rates.
Understanding the New Gas Pricing Formula
Since April 2023, a new formula is in place. Gas from fields given to ONGC and OIL before auctions is priced at 10% of the monthly average ‘Indian Basket’ crude price. This is the mix of crude imported by refiners. However, there is a floor and ceiling to protect both producers and consumers.
