Diesel prices rebounded to a record high price of ??89.87 per liter in Delhi on Thursday after state-run fuel retailers increased their rate by 30 paise per liter, the fifth increase in seven days, leading to an increase in the fuel rate of ??1.25 per liter.
Recent price hikes have also seen gasoline become more expensive by 45 paise a liter after its rate was increased by 25 paise on Thursday, the second hike in three days. Gasoline is now sold at ??101.64 per liter in Delhi.
While the Indian Oil Corporation (IOC) fuel rates in Delhi are benchmarks for the entire country, the retail prices of the two fuels differ from place to place due to variations in tax. ‘State and local levies.
Domestic gasoline and diesel rates continue to soar even as international crude oil prices edged down from the $ 80 a barrel they hit on Tuesday. Benchmark Brent crude opened Thursday at $ 78.46 a barrel, down 0.23%.
An executive working at a public sector oil company said on condition of anonymity that fuel retailers had calibrated the increase in domestic gasoline and diesel prices even as international oil prices registered a move towards the north from mid-September and crossed the $ 80 per barrel mark. “Companies are recovering the arrears because the full impact of rising international oil prices was not immediately passed on to the customer,” he said.
State-run oil refiners are cautiously monitoring developments in international oil prices, which are volatile and expected to rise due to growing demand and continued supply squeeze by the oil cartel – the Organization of oil-exporting countries and its allies, including Russia (collectively referred to as OPEC +).
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Domestic gasoline prices made their first upward movement from Tuesday after July 17, when they hit a record high of ??101.84 per liter. However, the recent rally in diesel prices started a bit early from Friday after it last hiked on July 15 to hit the record high. ??89.87 per liter.
Prices are also rising because the rupee depreciates against the dollar, making imports more expensive, the executives said. India imports over 80% of crude oil which it processes and pays for in dollars. Customers shouldn’t expect instant relief as fuel prices might not drop immediately, he said.
Prior to the recent rally that started on Friday, oil companies had cut gasoline and diesel prices in small doses by 65 paise per liter (gasoline) and ??1.25 (diesel) between mid-August and early September to pass the benefit of lower global oil prices, which had plunged to $ 68.23 per barrel on August 18.
According to the International Energy Agency (IEA) and OPEC, global demand is expected to exceed supply due to which international oil prices are likely to remain firm in the short to medium term. A simultaneous rally in natural gas is also likely to boost demand for alternative fuels, including crude oil, the executive said.
Global demand for crude oil has been steadily increasing with the easing of pandemic restrictions and improving vaccination rates, he said. âCrude oil prices hit their highest level in nearly three years as disruptions in global production forced energy companies to remove more crude oil from their inventories. As a result, US crude oil inventory levels are also near their three-year low, âhe added.
âOn the supply side, the OPEC + alliance has been slow to ease production restrictions, contributing to tightening supply in the market. In addition, Hurricanes Ida and Nicholas impacted crude oil production in the US Gulf of Mexico region when they struck in late August and September, respectively, âhe said.
International oil prices, which are often volatile, directly influence gasoline and diesel pump prices in India. Heavy central and state tax burdens are also responsible for the astronomically high rates of automotive fuels.
Until 2020, as world crude prices plunged (below $ 20 a barrel in April last year), the central government increased excise taxes on fuel to shore up its finances. States have also followed suit as their revenues have been affected due to the Covid-19 pandemic. As a result, central and state taxes on gasoline and diesel represent more than 50% of their retail prices.
According to official data, the oil sector has contributed ??371,726 crores Central excise revenue in 2020-2021, and ??202 937 crore of public levies or value added tax (VAT). In Delhi, central levies account for over 32.5% of the price of gasoline and state taxes (VAT) 23.07%. On diesel, central excise duty is over 35.8% while VAT is over 14.6%.