Gas prices, which are now pegged to a basket of globally traded fuel oils, fluctuate every quarter in tune with the trend in world-wide prices. Industry sources say that fuel oil prices at major ports around the world had crashed by $10 a barrel between June and August.

In June, furnace oil prices had slid by around 12 per cent in the Gulf to $ 56.50 a tonne from $ 64.38 a tonne in May. The world average of highs and lows of low-sulphur and high-sulphur furnace oil and low sulphur heavy stock (LSHS) rates worked out to be $69.5 a tonne in June.

In August, the same average of fuel oil prices worked out to $ 59.5 a tonne. In keeping with the TL Shanker Committee recommendations, the natural gas price at home will now have to be pegged at 65 per cent of this basket of fuel oil prices.

Market expertspredict that a stable global fuel oil price trend means stable prices for natural gas producers at home and a slight dip in prices for gas consumers, since gas rates are already rather close to a government determined floor. Till the turn of the century (when gas prices will be completely freed) natural gas prices at home will hover between a floor of Rs 2150 per 1000 standard cubic metres (SCM) and a ceiling of Rs 2850 per 1000 SCM.

The consumer price for natural gas was Rs 2241 per 1000 standard cubic metres during the quarter ending on September 30, except in the northeast. Consumers in the northeast only have to pay 40 per cent of the average of the basket of fuel oils.

The northeast consumer is expected to pay close to Rs 1600 per 1000 SCM this year, but the gas producer in the northeast, Oil India Limited, will get a producer price of Rs 1900 per 1000 SCM, on an average.

Oil India claims the difference between the consumer price and its entitlement, from the Gas Pool Account.

The Oil andNatural Gas Corporation, which produces 90 per cent of the country's oil and gas, earned a producer price of Rs 1834 per 1000 SCM since June 1.

After that first spurt, soon after the partial alignment of gas rates with global oil prices this month last year, natural gas prices have been on a downtrend.

Close on the heels of the worldwide crash in crude and petroleum product prices, natural gas prices for industrial consumers first dropped by 11 per cent in January and then by 8.4 per cent in in June. The producer price for ONGC fell by 5.8 per cent in January and then, more gently by 1.3 per cent in June.

The continued slide in fuel oil prices mean a further fall in the consumer prices of natural gas, while ONGC could hope to cling on to the September price of Rs 1834 per 1000 SCM. The stagnant gas price does not augur well for the country's key oil and gas producer, which has already been hard hit by the global downtrend in crude prices.

Prices of crude oil (which set the tone for petroleum productprices,) have never recovered from the spurt in oil production by Gulf nations in November 1997.

The subsequent output cuts declared by the Opec notwithstanding, crude prices have not been able to cross te $ 12 a barrel band since May.The progressive tumble in crude prices from $ 18 a barrel at this time last year, to $10 a barrel by April, pushed down prices of petroleum products as well. Crude prices recovered somewhat in the ensuing months, but not enough to make a significant difference to petroleum product prices.

Till the end of August, crude prices in the Gulf hovered in the region of $ 12.21 a barrel, while the North Sea Brent traded a few cents lower.