Petrol turns dearer by Rs 12 a litre, diesel by Rs 15 over the past year

The midnight of every fortnight always tends to hit Indian motorists’ wallets, more so as global crude oil prices have been on the boil since the past year. As January 15, 2016 turned into January 16, the price of petrol in India rose by Rs 0.42 a litre and diesel by Rs 1.03 a litre, the second price hike this year. 

In its official statement, oil marketing company Indian Oil Corporation said, “The current level of international product prices of petrol and diesel and the Indian rupees versus US dollar exchange rate warrant an increase in the selling price of petrol and diesel, the impact of which is being passed on to the consumers with this price revision. The movement of prices in the international oil market and the Indian rupee to US dollar exchange rate shall continue to be monitored closely and developing trends of the market will be reflected in future price changes.”

With the latest change, a litre of petrol costs Rs 77.46 in Mumbai, Rs 71.14 in Delhi, Rs 73.66 in Kolkata and Rs 70.61 in Chennai. Meanwhile, for those who tank up on diesel, a litre now costs Rs 64.89 a litre in Mumbai, Rs 59.02 in Delhi, Rs 61.27 in Kolkata and Rs 60.73 in Chennai.

Sifting through fuel prices over a one-year period reveals interesting facts. Do you know, for instance, that between January 16, 2016 and January 16, 2017, the price of a litre of petrol in Mumbai has gone up by Rs 11.37 a litre? Or that a motorist pays Rs 13.64 more for a litre of diesel in India’s financial capital?

The maximum rise for petrol price is in Delhi, where over 12 months, the price of a litre of petrol has gone up by Rs 12.11 and by Rs 15.37 for a litre of diesel in Chennai.

What has hit – and hurt – Indian motorists is that even when global crude oil prices were at a record low (February 2016), they never got the benefit of lower international prices. Beginning November 2014, the government has consistently raised excise duty on petrol and fuel and between November 2015 to March 2016, there were around five excise duty hikes.

Price build-up of petrol and diesel

While the highest component of the price of petrol and diesel remains the Refinery Transfer Price (RTP) on landed cost basis paid by the oil marketing companies to refineries, excise duty and value added tax add up to a fair bit (see the detailed price build-up tables below to see why petrol and diesel cost what they do in India). 

Will global crude oil prices rise?

Over the past year, global crude oil prices have nearly doubled over the past year, impacting India which imports around 80 percent of its crude oil requirements. From a 52-week low of US$ 27.82 per barrel in February 2016, crude oil as of today costs US$ 52.06 per barrel (bbl). One bbl or barrel is the unit of volume for crude oil and petroleum products and equals 42 US gallons or 35 UK (imperial) gallons, or approximately 159 litres.

At present, global crude oil prices seem to be stabilising at US$ 55 per barrel. Earlier this year, it was felt that the $ 60 mark would be breached following the decision of the Organisation of the Petroleum Exporting Countries (OPEC) to cut crude oil production by around 1.8 million barrels a day. But since then, a rise in US shale production seems to have put paid to further rise in prices.

According to oilprice.com, “Oil prices have been showing signs of weakness in recent days as concerns over excess supply are starting to crop up once again, potentially slamming the breaks on an almost two-month period of optimism stemming from the OPEC deal. At the start of 2017, there are two major dynamics at play occurring at the same time, each pushing in opposite directions on the market. The OPEC deal is slated to take oil off the market, while U.S. drilling is expected to add new supply. The pace and magnitude of each trend will ultimately drive oil prices one way or the other."

Data tables: Indian Oil Corporation