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Diesel rates bounced back to record ₹89.87 a litre on Thursday
State-run oil refiners are cautiously watching the international oil price movement, which is volatile and expected to move up due to rising demand and continued supply squeeze
Diesel prices bounced back to the record price of ₹89.87 per litre in Delhi on Thursday after state-run fuel retailers raised its rate by 30 paise a litre, which is the fifth hike in seven days, resulting in the fuel rate surging by ₹1.25 a litre.
The recent price hikes also saw petrol becoming costlier by 45 paise a litre after its rate was raised by 25 paise on Thursday, which is the second hike in three days. Petrol is now sold at ₹101.64 a litre in Delhi.
While fuel rates of Indian Oil Corporation (IOC) in Delhi are benchmarks for the entire country, retail prices of the two fuels differ from place to place because of variations in state taxes and local levies.
Domestic rates of petrol and diesel continue to soar even as international crude oil prices retreated marginally from $80 a barrel mark it had achieved during Tuesday. Benchmark Brent crude on Thursday opened at $78.46 a barrel, down by 0.23%.
An executive working in a public sector oil company said on condition of anonymity that fuel retailers calibrated raising domestic rates of petrol and diesel even as international oil prices saw a northward movement from mid-September and it breached the $80 a barrel mark. “Companies are recovering past dues as the full impact of international oil price hike was not immediately passed on to the customer,” he said.
State-run oil refiners are cautiously watching the international oil price movement, which is volatile and expected to move up due to rising demand and continued supply squeeze by the oil cartel -- the Organisation of the Petroleum Exporting Countries and its allies, including Russia (together known as OPEC+).
Also Read: Reduce taxes, give relief to common man: Gehlot to Centre on fuel price hike
Domestic petrol prices saw first upward movement from Tuesday after July 17, when it hit an all-time high of ₹101.84 per litre. However, the recent diesel price rally started a bit early from Friday after it was last hiked on July 15 to the record ₹89.87 a litre.
Prices are also moving up because the rupee is depreciating against the dollar, which makes imports costlier, the executives said. India imports more than 80% crude oil it processes and pays in dollar. Customers should not expect any instant relief as fuel prices may not soften immediately, he said.
Before the recent rally that started from Friday, oil companies had reduced petrol and diesel rates in small doses by 65 paise per litre (petrol) and ₹1.25 (diesel) between mid-August and early September to pass the benefit of global oil price softening, which had plunged to $68.23 per barrel on August 18.
According to International Energy Agency (IEA) and OPEC, global demand is expected to outpace supply due to which international oil prices will likely remain firm in the near to mid-term. A simultaneous rally in natural gas is also likely to drive demand for alternate fuels, including crude oil, the executive said.
Global demand for crude oil has been increasing consistently with the easing of pandemic restrictions and improving vaccination rates, he said. “Crude Oil prices have reached to near three-year high as global output disruptions have forced energy companies to draw more crude oil out of their stockpiles. Accordingly, US crude oil inventory levels are also nearing a three-year low,” he added.
“On the supply side, OPEC+ alliance has been slow in easing output restrictions, contributing to the tightened supply in the market. Additionally, hurricanes Ida and Nicholas have impacted crude oil production in the US Gulf of Mexico region, when they hit in late August and September respectively,” he said.
International oil rates, which are often volatile, directly influence pump prices of petrol and diesel in India. Heavy loads of central and state taxes are also responsible for astronomically high rates of the auto fuels.
Through 2020, as global crude prices plunged (below $20 a barrel in April last year), the Central government raised excise duty on fuel to shore up its finances. States too followed suit as their revenues were hit on account of the Covid-19 pandemic. As a result, the central and state levies on petrol and diesel are over 50% of their retail prices.
According to official data, the petroleum sector contributed ₹371,726 crore Central excise revenue in 2020-21, and ₹202,937 crore state levies or value-added tax (VAT). In Delhi, Central levies account for over 32.5% of petrol’s price, and state taxes (VAT) 23.07%. On diesel, the Central excise is over 35.8% while VAT is more than 14.6%.
