Tag: Crude Oil

  • Petrol Prices in India dip by Rs. 2, but still costly than a beer

    Often when elections near, you get some cheer! Here, have some beer!

    Beginning Wednesday, the price of petrol will fall in Delhi by Rs 2.22 a litre and by Rs 2.34 a litre in Mumbai.

    It is not very clear from all explanations we have got why this price dip now? The Minister of State for Petroleum RPN Singh states that the dip is in line with the crude oil prices and not a political decision. Ever since de-control of petroleum prices, this is the first time ever all three PSU petroleum marketing companies have reduced prices. I still have my own reasons to believe that it is not the prices; it’s the votes that have forced the dip.

    While last time around, the oil marketing companies had asked the media not to go by the international crude oil prices but see Indian crude baskets. The minister vehemently defended saying Oil companies have turned up to the media and have made it public that they will not make any profits. Pressure from all corners, including its strong ally, forced government to take this step.

    According to a report by a leading Indian News channel, Mukesh Ambani’s Reliance Petroleum sells most of its refined petroleum products out of India, which means its products, are exported rather than used for the domestic consumption. I am not sure about the authenticity of this news report, but if it is any true, I need to understand why?

    Globally, crude oil prices have gone up to 110$ per barrel from 80$ per barrel last year. At the same time, Rupee has depreciated against $ to reach Rs. 50 per US Dollar. This hike is caused by reduction of crude oil supply from Libya and other factors. The linked excel sheet will give you a prospective about how the Crude Oil prices have fluctuated.

    Global Crude Oil Prices from 1978. (Excel, Size: 387KB)

    Now with decontrol is in place, we have to get used to see frequent changes in prices which will reflect (according to Ministry and Oil companies) true value of a one liter of petrol that goes into your vehicle.

    Psychological Factor for our domestic market is any hike in fuel prices will in turn inflate prices of all essential commodities. Irrespective of the fact that hike might only be affecting Petrol. We all know that India’s transport sector relies on Diesel for transportation and any rise in petrol should never affect the prices for this sector. But eventually it does. Something I do not understand is how we can allow this to happen when diesel is still subsidized and we, the tax payers pay for it.

  • Petrol pricing shouldnt be free

    If this had happened, the petrol price would have set us back by INR 90 for a liter when the crude oil touched $150 per barrel.

    In India, Petrol and Diesel prices are subsidized so that common man can affort it. But a free market will mean boom for petrol companies than for the Common man. With food prices already sky high, this would add much to the misery of a Common man. He would have more burden to share and more hours to put at his work.

    Issues with the Common Man

    1. Poor Salary rise in the wake of recent recession
    2. Hikes ranging from 4% of CTC to just 5% of Basic salary component.
    3. Saving rate down by 23% (an estimate based on my own calculations)
    4. Prices of Essential commodities have increased
    5. Food prices increased; sugar, toor dal etc. heavily affected
    6. Job security issues
    7. Limited spending – which in turn effects the overall economy.

    All this is just a small snippet of what could be a much more worse scenario. Why the sudden price hike is being debated madly between the names that be, but over all scenario has put all the politicians to blame.

    Its been circulated in the internet media that politicians are using this price manipulation technique to fill up their coffers and  also to ensure their votebank also stays loyal.