The prices of petrol and diesel saw their steepest lifetime hikes over the last year. According to a report in Moneycontrol, 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. The surge in prices took place despite a decline in crude oil rates by 32 per cent during the same period.
The price of petrol in Delhi was Rs 90.58 per litre on February 22, while diesel was Rs 80.97 per litre. The rise in taxes by the Centre and State governments after international crude prices reached $19 a barrel last April is a major reason behind the current high price.
In February 2021 alone, petrol and diesel prices were raised by Rs 4.28 a litre and Rs 4.49 a litre respectively. This led to Finance Minister Nirmala Sitharaman terming it a vexatious issue. Data on fuel prices since 2003 accessed by Moneycontrol indicate that, in percentage terms, the highest rise in diesel prices occurred between 2016 and 2017 (February 22), when it zoomed by 31% or Rs 14.06 per litre. Similarly, petrol prices saw their steepest rise of 31 per cent or Rs 13.65 per litre in 2011.
Since June 26, 2010 and October 19, 2014, prices for petrol and diesel have been market-determined. The government launched a daily pricing mechanism on June 16, 2017, in order to bring more transparency to the cost of petrol and diesel. The price of petroleum products is based on a 15-day average of the foreign market prices of the respective products. After taking into account factors such as international product rates, the exchange rate, the tax structure, inland freight and other cost elements, oil marketing firms take a call on the retail selling price.
Compared to a historic low of $19 a barrel in April 2020, Brent oil prices increased to $63.73 a barrel at one point on February 22. Every $1 rise in the price of crude oil will drive up the price of petrol and diesel by 50-55 paise per litre. Every $1 barrel rise in oil prices, according to projections, increases the country’s import bill by $1.4 billion and every $10 barrel increase in crude oil prices increases the fiscal deficit by around 0.1% of GDP. The decline in oil production by the Organization of the Petroleum Exporting Countries (OPEC) is a major explanation for the recent increase in international crude oil prices
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