Pinching the pockets of the common man, prices of petrol and diesel saw their steepest lifetime hikes over the last year.
Between February 22 last year and this year, rates of petrol increased by Rs 18.64 a litre and diesel by Rs 16.32 a litre, rising 26 per cent and 25 per cent, respectively. This is despite an average 32 percent year-on-year decline in crude oil prices.
On February 22, the petrol price in Delhi was Rs 90.58 per litre, while diesel was at Rs 80.97 per litre. A major reason for the current high price is the increase in taxes by the Centre and State governments after international crude prices touched $19 a barrel last April.
In February 2021 alone, the rates of petrol and diesel were increased by Rs 4.28 a litre and Rs 4.49 a litre, respectively, leading to Finance Minister Nirmala Sitharaman terming it a vexatious issue. Data on fuel prices since 2003, which Moneycontrol got access to, show that in percentage terms, the largest escalation on diesel prices was between 2016 and 2017 (February 22), when it zoomed by 31 per cent or Rs 14.06 a litre. Similarly, in 2011, the prices of petrol saw their steepest hike of 31 per cent or Rs 13.65 a litre.
Prices of petrol and diesel have been market-determined since June 26, 2010, and October 19, 2014, respectively. In order to bring more transparency to the cost of petrol and diesel, the government had introduced a daily pricing mechanism on June 16, 2017. The price of petroleum products is based on a 15-day average of the rates of the respective products in the international market. Oil marketing companies take a call on the retail selling price after taking into account factors such as international product prices, the exchange rate, tax structure, inland freight and other cost elements.
Brent crude prices increased to $63.73 a barrel at one point on February 22 as compared to a historic low of $19 a barrel in April 2020. Every $1 increase in the crude oil price may push petrol and diesel prices up by 50-55 paise a litre. As per estimates, every $1 barrel rise in oil price increases the country’s import bill by $1.4 billion and every $10 a barrel increase in crude oil prices increases the fiscal deficit by about 0.1 per cent of GDP.
A major reason for the current rise in international crude oil prices is due to the cut in oil production by the Organization of the Petroleum Exporting Countries (OPEC).
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