WHY ARE FUEL’S PRICE RISING?

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In India’s capital petrol price hiked to ₹104.41/L, whereas in Nashik its upto ₹118.74/L which is the most petrol price of any state.

Crude oil prices have raised over 40%, mostly due to the ongoing Russia-Ukraine war, but Oil Marketing Companies (OMCs) kept the retail prices unchanged. Crude oil prices went up by 25% since the last hike in November.

Not only in India, but many countries are facing the problem of rise in fuel pricing.

Many of you will think its because of the Russia-Ukraine war. Well it is the reason, but there are also many other problems which is leading to the rise in fuel pricing.

To clear all your doubts on the cause of hike in fuel pricing, I decided to make a blog on this popular topic. So stay alerted till the last.

WHY IS THE PRICE RISING?

One of the biggest reasons for the steep rise in oil prices globally is due to the ongoing Russia-Ukraine war.

The price rise was triggered by the fears that oil and gas supplies from Russia could be disrupted due to the conflict.

There was also the fear that retaliatory western sanctions would be imposed on Russia on grounds of Ukraine invasion.

Russia makes up for a third of Europe’s natural gas demand and about 10% of global oil production.

Another important factor is that about one-third of Russian gas supplies to Europe travels through pipelines crossing Ukraine.

RUSSIAN-UKRAINE WAR IMPACT ON INDIA

India is spared to some extent because Russian supplies of oil and gas account for a tiny percentage.

India imported 43,400 barrels per day of oil from Russia in 2021, which is about 1% of overall its imports.

Coal imports from Russia stood at 1.8 million tonnes in 2021, which made up for 1.3% of all coal imports.

India also buys 2.5 million tonnes of Liquefied natural gas (LNG) a year from Russian company Gazprom.

But domestic fuel prices are directly linked to international oil prices as India imports 85% of its oil needs.

Hence supplies seem to be of little worry for India, but it is the oil prices that are a cause of concern.

HOW ARE OIL PRICES DETERMINED IN INDIA ?

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Oil prices are determined by state-owned OMCs like Bharat Petroleum, Indian Oil and Hindustan Petroleum.

There are four contributing factors which determine the price of petrol and diesel in the country.

India imports Brent crude oil from the Organisation of the Petroleum Exporting Countries (OPEC) countries.

The crude oil is processed by boiling and then distilling to separate various fuels and gases.

The base price for these fuels, like petrol and diesel are then decided by the Central government.

After the base price of these fuels are decided, the processing and freight charges are added to them

Commission for the dealer at the petrol pump, Centre’s excise duty, and state government’s VAT are added to it.

And then the final price in the respective states are determined. Fuel is more expensive in states with lower demand.

Therefore in my first paragraph delhi which has a higher demand of petrol has a low price whereas in the case pf nashik which has lower has the highest price.

I hope by this blog I am able to make you understand the reason behind the rise in crude oil.

References-

[1] brandsynario

[2] The hans india