Petrol and Diesel prices rose again on Monday. Petrol prices are now hovering over four-year peak in the country and diesel is at an all-time high following a rapid rise in international rates led by strong global demand.
The prices of non-branded petrol was raised by 10-11 paise per litre in different metro cities today while diesel prices were increased by 11-12 paise.
Petrol prices were highest since September 2013 in Delhi. In Mumbai and Chennai, prices were highest since July 2014, and in Kolkata since August 2014. Petrol was sold for Rs 73.83 a litre in Delhi, and Rs 81.69 in Mumbai at Indian Oil pumps.
Diesel was also selling at record prices in all four metro cities of Delhi, Kolkata, Mumbai and Chennai. At Indian Oil outlets, diesel was priced at Rs 64.69 a litre in Delhi and Rs 68.89 a litre in Mumbai.
Higher prices are considered negative for heavy oil importers like India. Higher fuel prices trigger broader inflation, shrink room for rate cuts by the central bank, increase demand for foreign exchange, and leave the exchequer with lesser resources for development work as demand for subsidy and tax cuts rises.
A sharp recovery in crude oil prices, which is up 47% since July 1 last year, is estimated to have expanded India’s oil import bill to $88 billion in 2017-18 from $70 billion in the previous year. India imports nearly 82% of its oil requirement.
Indian Oil, Bharat Petroleum and Hindustan Petroleum control about 92% of fuel market while private players such as Reliance, Essar and Shell control the balance.
On Sunday, state companies cut prices of jet fuel in their monthly revision. Indian Oil cut the price to Rs 61,450 per kilo litre from Rs 61,681 for domestic airlines.
Petrol and diesel prices are market determined in India for years. To arrive at retail prices, companies add their marketing margin, dealers’ commission and government duties to refinery gate prices that are equal to international rates of petrol and diesel.
Crude oil, which collapsed in mid-2014 and has since traded lower, has sharply gained in the past nine months. It’s up 47% since July 1 last year, and has gained about 5% this year.
Strong compliance on supply cuts promise by key producers including OPEC members and Russia, and talks about some producers considering extending efforts at draining the global supply glut to next year seem to be pushing up oil prices.