Domestic gas price drops to two-year low of $6.41/mmbtu, first time below ceiling

New Delhi: The domestic natural gas price has dropped to a two-year low of $6.41 per million British thermal units (mmbtu) for June, delivering a major boost to city gas companies and other users of price-regulated fuel.

Cooking and transportation costs could ease if city gas distributors choose to pass on some of the benefit to end consumers.

The price of domestic gas—also known as the Administered Price Mechanism (APM) price—is set monthly by the government based on the average crude oil price in the preceding month. A recent decline in crude prices has brought the June gas price down to $6.41 per mmbtu from $6.93 in May, according to a government notification. The effective price in May was $6.50, the ceiling for domestic gas.

For the first time since the current pricing formula was introduced in April 2023, the domestic gas price has fallen below the ceiling, thanks to a sharp drop in crude oil prices. Over the past two years, elevated crude prices had made the ceiling the effective market price each month. The average Indian crude basket price in May was $64.05 per barrel, down from $67.73 in April.

Lower crude prices will also reduce the cost of “new well” gas for city gas distributors. Priced at 12% of the crude oil rate, new well gas constitutes a significant portion of their input costs.