India saw a hike of petrol and diesel prices by 80 paisa a litre each on March 25, which was the third increase in four days. The country had not seen an increase in petro price for more than 135 days (approximately from February 4) until the elections to the five states ended. Well, why is petrol, diesel prices hiked now?
The country also saw an increase of Rs 50 per domestic cooking gas (LPG) cylinder after the elections.
WHY OIL PRICES NOT HIKED EVEN AS IT INCREASED GLOBALLY IN RECENT TIMES?
After Russia invaded Ukraine in February, the price of petroleum products was on the boil. The world slowly started to see an increase, interrupting that oil and gas supplies from energy giant Russia could be disrupted by the conflict. Russia makes up for a third of Europe’s natural gas and about 10 per cent of global oil production. About one-third of Russian gas supplies to Europe usually go through pipelines crossing Ukraine. As far as India is concerned, Russian supplies account for a tiny percentage. India imported 43,400 barrels per day of oil from Russia (about 1 per cent of overall its imports), 1.8 million tonnes of coal imports from Russia in 2021. India also buys 2.5 million tonnes of LNG a year from Gazprom of Russia.
WHY OIL MARKETING COMPANIES HIKED FUEL PRICES?
It was after four months that the Oil Marketing Companies increased the price of petrol and diesel. This is mainly because of a sharp increase in crude oil price. The price of Brent crude has increased by 45 per cent to $118.5 per barrel, up from $81.6 barrel when OMCs last revised fuel prices. India imports about 85 per cent of its crude oil requirements. The prices of petrol and diesel are revised daily in line with a 15-day rolling average of benchmark prices of the petroleum products. However, the price remained constant from November 4, after the Narendra Modi Government announced a Rs 5 per litre cut in excise duty on petrol and a Rs 10 per litre cut in excise duty on diesel. The freeze in price revisions continued until the end of the state elections in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur earlier this month.
HOW MUCH FUEL PRICES EXPECTED TO RISE?
Fuel experts point out that prices of petrol and diesel are likely to be hiked by about Rs 0.52 for every $1 per barrel increase in the price of crude oil to allow OMCs to maintain their marketing margins.
However, an increase in refining margins – the difference between the price of crude oil and the value of petroleum products produced crude oil in a refinery – may allow refiners to continue to absorb some of the impact of higher crude oil prices
WHEN WAS PETRO PRICES FREEZED LAST TIME?
Petroleum prices were not hiked at the time of elections. The country saw a 19-day price freeze ahead of Karnataka polls in May 2018, despite international fuel prices going up by nearly $5 per barrel. The moment the polls were over, oil companies raised prices for 16 straight days. Fuel prices were also steady between January 16, 2017 and April 1, 2017, when assembly elections in five states – Punjab. Goo Uttarakhand, Uttar Pradesh, and Manipur – were held and then again for 14 days ahead of the assembly elections in Gujarat in December 2017. Similarly, oil prices began to rise a day after the final phase of polling for the 2019 Lok Sabha elections ended. Several analysts had expected an increase in fuel prices after the 2022 polls.