Get ready to pay more on diesel and petrol. Here’s why

You will have to pay more for fuel in the New Year as OPEC powerhouses-Saudi Arabia and Iraq, which form nearly 40% of the oil India imports from West Asia, recently initiated steps to bring low oil prices to an end.

Saudi Arabia is the world's largest exporter of oil and in the last two years, it sparked the oil price crash with hefty discounts, raised premium on grades of crude shipped to Asia and the US and initiated talks with buyers to cut supplies by 3-7% in February .

Reportedly, a news agency report said Iraq, the second major OPEC exporter and currently among India’s top two oil suppliers, has initiated steps to pare output.

Both the developments indicate the November agreement among OPEC members and other major oil exporters such as Russia is well on its way to being implemented, proving sceptics wrong.

The target is to cut output by 1.8 million barrels a day, nearly equal to India's daily import of 1.9 million barrels, with a view to sucking out stockpiles and rebalance market. This is bad news for fuel consumers in a country such as India which imports nearly 80% of its oil needs. Through much of 2015 and 2016, fuel bill shrunk for consumers as oil prices tumbled some 70% from 2014 high of $112 a barrel. Lower oil prices reduced India's import bill and eased subsidy burden on the government giving it legroom to mop up additional money for social sector spending by raising excise on fuels five times.

However, now the good times are coming to an end as petrol prices were already raised thrice and diesel prices twice in December as the cost of Indian Basket--the mix of crude bought by India--rose 21% from its November level. Any upward movement in global crude, combined with the rupee's weakness against the greenback, invariably accentuates the impact on pump prices.