InvestorQ : Why are petrol and diesel prices rising to historic highs daily and what could be the impact?
Priyanka N made post

Why are petrol and diesel prices rising to historic highs daily and what could be the impact?

Neelam Naik answered.
2 years ago

Even as crude has gotten close to $65/bbl, the local prices of petrol and diesel have shot through the roof. With oil prices being set daily, the recent rise in crude prices has pushed petrol price to Rs.90.58 a litre in Delhi and diesel to Rs.80.97 a litre. Delhi has the lowest price because it was as high as Rs.97 per litre in Mumbai fand diesel rate had crossed Rs.88. In some places, petrol has scaled above Rs.100/litre.

Friday marked the 12th straight day of price hike and the largest daily increase since oil companies started to revise rates daily in 2017. The prices were spiked by nearly 35 paisa in a single day. Diesel now comes for ₹ 80.97 a litre in the national capital and for ₹ 88.06 in Mumbai.

The recent spike in the price of fuel has come from the Arctic blast in Texas which has impact the global supply by nearly 4 million barrels per day. There is a unique problem for India because she is dependent on imports to meet 85% of daily oil needs. Brent oil crossed $65 a barrel this week due to the Texas shortage but the real reason for the spike in oil prices in India is something much bigger.

Today, the excise and customs duty accounts for over 60% of the price of petrol and diesel. That is because, when the prices of crude were falling, the government did not pass on the benefit to the customers. Instead, it hiked the duties. Today, when the global prices are shooting up, the government is in a quandary.

It can allow the prices to really shoot through the roof. At the same time, the government is badly starved for funds and they cannot reduce duties as it could compromise the revenue situation of the government.