With the lockdown getting lifted in various countries, personal vehicles will be considered safer than using public transportation as pandemic still surface. With the possibility of more vehicles on the road now, the demand for automobiles and fuel will spike. However, the obstacle in India is the ‘soaring oil prices’.
Even when the pandemic hit the global oil market causing a dip in the price, the petroleum rates in India have relatively gone up in response.
The outbreak of the coronavirus in Wuhan, China, which gradually spread globally as well as the dispute between Saudi Arabia and Russia over oil production have drastically brought down the demand and price of petrol and diesel. As of June 15, 2020, the average price of petrol around the world is USD 0.95 per litre. However, there is a substantial difference in these prices among countries.
On June 16, 2020, the United Arab Emirates (UAE) Energy Minister, Suhail Al Mazroui, stated that the Organization of the Petroleum Exporting Countries (OPEC) and its member nations with poor compliance are ready for deeper cuts and will meet their commitments. He further revealed that the demand for oil was recovering, which helped the fuel prices to move up.
Impact on India
Oil Marketing Companies (OMCs, such as Indian Oil, Bharat Petroleum and Hindustan Petroleum) have taken the drastic step to increase the price of petrol and diesel. As on June 16, 2020, a litre of petrol in the respective places in India are as follows:-
Petrol (in Rs)
Diesel (in Rs)
|(Source: Indian Oil)|
These prices are the highest since October 04, 2018, when petrol cost was Rs 84 per litre, and diesel cost was Rs 75.45 per litre in New Delhi. Earlier, petrol price got revised within a period of every two weeks, whereas from June 15, 2017, the revision happened daily.
Since June 7, 2020, the OMCs have been revising the oil prices at a high rate to regain the losses incurred during the period of lockdown. According to the Press Trust of India (PTI), oil retailers have increased petrol and diesel prices by Rs 5.47 and Rs 5.80 respectively in the last ten days.
Petrol price hiked by 47 paise/litre, diesel by record 93 paise;rates go up cumulative by Rs 5.47 and Rs 5.8 respectively in 10 days
— Press Trust of India (@PTI_News) June 16, 2020
Also, the Central Government had increased the Excise Duty on a litre of petrol, diesel by Rs 10 and Rs 13 respectively.
Initially, the OMCs did not consider increasing the fuel prices due to the low demand in the nation. However, after the relaxations started since ‘Unlock India 1.0’, the mobility of vehicles increased. As a result, the OMCs are increasing the petrol and diesel prices in India, especially in the Metropolitan Cities (shown in the table above).
This hike in the Indian petrol rates are a complete contrast to the fall in the global crude prices.
As on June 18, the fuel price in India was yet again revised with a litre of petrol in Delhi retailing at Rs 77.81, compared to yesterday’s rate of Rs 77.28. Diesel, on the other hand, is retailing at Rs 76.43 per litre. Petrol price has been hiked by 53 paise while diesel rates in the country went up by 64 paise.
Factors affecting the Petrol Price in India today
- Cost of Crude Oil
- Increased Demand
- Mismatch of Demand and Supply
- Tax Rates
- Rupee to Dollar Exchange rate
Effect of the hike in petrol price, on the consumer
In light of the severe blow given by the coronavirus to the Indian economy, an average working-class citizen will find it hard to pay for the same. The deadly virus has caused several people to lose their job, which a severely crushing economy up ahead. In a situation where a man finds it hard to earn money to sustain his life, the need to pay a higher price for fuel is definitely going to invite an adverse response to this strategy of the OMCs.