The incessant fuel hike that has led to petrol and diesel prices crossing ₹100 per litre mark in Rajasthan and Madhya Pradesh is expected to impact the fuel consumption expenditure of the common man and his budget due to cost escalation in essential commodities. Mint explores.
What factors influence price tweaks in fuel?
The factors influencing fuel prices in India are international crude oil price, import duty, refinery cost, freight cost, central excise, state value added tax, margin of marketing companies and retail fuel outlets. Output cuts by oil producing nations across the world along with high taxes have been the cause of skyrocketing fuel prices.
Recently, international oil prices have been on the rise leading to crude rising to $63 per barrel. This has come on the back of a deal between Opec+ and Saudi Arabia pledging additional voluntary output cuts of 1 million barrel in the daily production, thus reducing supply in the market.
How does India source its fuel requirements?
India is the world’s third largest importer of crude oil and with recovery following a V-shaped trajectory, December 2020 crude imports were 11.6% higher y-o-y. With India importing nearly 84% of petroleum products consumed domestically, global crude oil price changes have a bearing on its domestic price.
India primarily imports crude from Iraq, Iran, Saudi Arabia, Iraq, the UAE, Nigeria, Brazil, and the US with Iraq being the top oil supplier followed by Saudi Arabia. India has strategic petroleum reserves equivalent to 85 days of imports thus providing a cushion during any supply chain disruptions.