The day is not far when petrol will cost Rs 150 a litre since the fuel price hike rally has been continuing unabated.
Petrol cost Rs 121.62 a litre at Sri Ganganagar, the northernmost city of Rajasthan, on Sunday, while diesel went for Rs 114 a litre. Petrol price touched an all time high in Thiruvananthapuram on Tuesday at Rs 112.70. The crude oil price touched a seven-year high of $83.75 a barrel in the international market, and it is expected to go further north since the demand for fuel has been on an uptick after the apparent waning of the COVID-19 crisis.
The current situation is likely to make petrol prices shoot up to Rs 150 a litre in the coming weeks. The Central and State governments, however, do not seem to be in a mood to announce tax cuts to lessen the burden on the people.
The governments have been compensating for the losses incurred due to the pandemic, including the spendings for combating COVID, from the taxes on petroleum products. Any fluctuation in fuel price in the international market will reflect on the price in India. With the price of crude oil going past the $83 a barrel mark, experts believe that fuel will cost more in India.
Reports, meanwhile, are not positive about a significant decrease in crude oil prices despite Iran expressing willingness to resume nuclear talks with six global powers, including the European Union. The development, however. may bring the price a shade lower, but no significant change has been predicted since Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan, which form the OPEC+, have not decided to ramp up production.
Govts reluctant to cut taxes
Though the clamour for slashing taxes has been getting louder, the country is yet to see any major protection against the ever-increasing fuel prices. Some other protests triggered questions after they further caused difficulties to the common man. A Congress protest in Ernakulam on Monday grabbed headlines for Actor Joju George's outburst against activists blocking a main artery, the Aroor-Edappally Bypass.
The question now is on what is required: protests against the price hike or comprehensive political interventions into the taxation system?
Most Indian States are opposed to the Centre's suggestion to bring petroleum products under the Goods and Services Tax (GST) regime. The opposition stems from the fact that it would adversely affect the States' revenue. The Centre and States are now demanding each other to reduce the tax on petroleum products with no follow up action, even as the common man continues bearing the brunt of price hike.
The ruling parties at the Centre and States are not actively participating in any protests, since neither the States nor the Centre are willing to cut the tax. The protests by opposition parties have not been successful.
Meanwhile, prime minister last month conveyed India's concerns over the unabated fuel price hike to oil producing countries, and sought their cooperation in controlling the price.
Demand increases
Several countries have lifted COVID-19-related lockdown and economic activities are picking up after a pandemic hiatus, resulting in a higher demand for petroleum products. The demand will further increase as industrial production gathers steam, and travels return to pre-COVID situation. The markets are confident of overcoming the Delta variant of coronavirus. The petroleum price hike can be attributed to the reluctance of oil producing nations to meet the global demand.
Several countries are not encouraging fossil fuel following climate change-spurred disasters in many nations. Major investments, too, are more into environment-friendly energy, and this one reason for OPEC (organisation of the Petroleum Exporting Countries)'s reluctance to increase production and supply. The crude oil price has been inching towards the $85 a barrel mark following OPEC+'s decision to regulate production.
It is now estimated that the demand for oil will reach the pre-COVID levels by the beginning of 2022.
The gap in demand and supply will accelerate the fuel price hike to $100 a barrel before long. Cyclones Eda and Nicholas hitting the crude oil production in the US also contributed to the high prices.
If the crude oil price touches $100 a barrel, the petrol price in India may shoot past the Rs 150 a litre mark, and the Central and State governments are not likely to introduce regulatory mechanisms soon.
Reports have already indicated that the global demand for crude oil will rise to 100 million barrels a day by this year-end. The demand was for 995 million barrels in 2019. It has been reported that the production from OPEC and allies will not cross 4 lakh barrels a day in December.
The market uncertainty due to COVID-19, too, prompted OPEC from ramping up oil production. Incidentally, the crude oil price dipped to $83.7 a barrel after touching $86 last week. The decrease was the first in two months. Experts felt there will be certain corrections in the price this week also.
Still, a significant decrease in oil price cannot be expected since OPEC+ is against ramping up production. The benefits of slight decrease in fuel price are likely to reach the common man. The oil companies, which promptly increase the price proportionate to the hike in the international market, seldom extend the benefit once the price decreases. The fuel price in India had continued to rally despite the price of Brent crude dipped to $19 a barrel last year. The high taxes have been cited for not slashing the price.
Kitchen budget derailed
The rallying crude oil price will derail the household budget also. Normally, the price of natural gas increases along with the winter in Europe. This has been the trend. However, over the past few months, the price of LPG has been showing a consistent sharp increase. Winter has gripped Europe now, and the LPG price is expected to further increase. Currently, a cylinder costs close to Rs 1,000. The lack of subsidy, too, has hit the common man.
The fuel price has increased freight charges, which is reflected in costlier essential items and construction materials.
No respite from price hike
The fuel price has been continuously increasing in the country ever since the hike in crude oil price in the international market. The price, however, remained unchanged between September 5 and 24, but it later started going north daily, barring a day or two. The crude oil price had touched $76 a barrel in July last, but later dipped to $64. During this period, petrol and diesel prices were reduced merely by 65 paise and Rs 1.25.
However, petrol and diesel prices were increased by Rs 11.4 and 9.15, respectively, between May and July, reflecting the double standard since the crude oil price had then dipped. It was at this juncture that the petrol price crossed Rs 100, and it is inching closer to Rs 110 mark in several places, including Delhi. In Kerala, the price has already touched Rs 110, and in rural Maharashtra and Rajasthan, petrol is selling for more than Rs 120 a litre.
In October alone, petrol and diesel became costlier by Rs 7.70 and 8.32, respectively.
