Over the last 15 days, the price of petrol and diesel has risen by roughly Rs 9.2 per liter, but the rise in price will be in the same trend for much more days as oil marketing companies (OMCs) modify pricing in line with rising crude oil prices.
Experts say OMCs need to raise the retail price of petrol and diesel by Rs 0.52-0.60 for every $1 per barrel increase in crude oil price in order to maintain regular marketing margins on motor fuel sales.
Brent crude has climbed by around $28.4 per barrel since November 4 to $108.9 per barrel, implying that at the current Brent Crude price, petrol and diesel prices might witness additional increases of Rs 5.5-7.8 per liter each.
On November 4, OMCs announced a 137-day price freeze, which includes state Assembly elections in Uttar Pradesh, Punjab, Uttarakhand, Manipur, and Goa.
“For every $1 increase in crude oil prices at current tax rates, the retail price of petrol and diesel should increase by 60 paise,” said Prashant Vasisht, Vice President & Co-Group Head at credit rating agency ICRA.
The Centre, on the other hand, may decide to mitigate the effect of increasing crude oil costs on consumers by lowering excise duties on both gasoline and diesel. Despite a Rs 5 per liter drop in fuel excise duty and a Rs 10 per liter cut in diesel excise duty in November 2021, government taxes are higher by Rs 8 per liter on petrol and Rs 6 per liter on diesel than they were before the epidemic. In Delhi, central and state taxes presently account for around 43% of the retail price of gasoline and 37% of the pump price of diesel.
Last week, OMCs increased the price of LPG by Rs 50, bringing the price of the cooking fuel in the capital to Rs 949 per 14.2 kg cylinder. According to analysts, OMCs are still losing money on LPG sales at current pricing due to high crude oil costs.
Reason for the recent rise in fuel prices?
Starting November 4, after the Centre announced a Rs 5 per liter petrol excise duty drop and a Rs 10 per liter diesel excise duty cut, OMCs maintained the prices of fuel and diesel steady for 137 days.
As OMCs have resumed price adjustments, the full impact of the period’s surge in international oil prices is now being passed on to consumers. After 13 price rises in 15 days, the price of petrol has climbed to Rs 104.6 per liter and the price of diesel has risen to Rs 95.9.
Normally, the price of gasoline and diesel is adjusted daily, based on a 15-day rolling average of benchmark international petroleum product prices.
The conflict between Russia and Ukraine, as well as attacks on Saudi Arabia’s oil and gas infrastructure, have raised fears about probable crude oil supply interruptions, driving up crude oil prices.