How Petrol and diesel prices hiked after 4 months, LPG to cost Rs 50 more

The prices of both petrol and diesel are expected to rise further, as crude oil prices have increased sharply due to the Russia-Ukraine conflict. The price of Brent Crude has increased by 40 per cent to $114.2 per barrel, up from $81.6 barrel when OMC last revised fuel prices. India imports about 85 per cent of its crude oil requirements.

 State-owned OMC kept the prices of both petrol and diesel constant since November 4, when the Center announced a Rs 5 per liter cut in excise duty on petrol and a Rs 10 per liter cut in excise duty on diesel. The freeze in price revisions continued in the run-up to the Assembly elections in five states earlier this month. Ordinarily, the prices of petrol and diesel are revised daily, in line with a 15-day rolling average of benchmark prices of petroleum products.

 On Sunday, OMC hiked the price of bulk diesel by Rs 25 per liter, taking bulk prices well above prices at retail pumps. The bulk price of diesel in Mumbai is currently Rs 122 per liter, while the price at retail pumps is Rs 95 per liter.

 Experts note that the prices of both petrol and diesel need to be hiked by about Rs 0.52 for every $1 per barrel increase in the price of crude oil to allow OMC to maintain their marketing margins. As the price of crude has increased by nearly $33 per barrel since the last price revision, OMC may need to hike prices by as much as Rs 17 per liter for both petrol and diesel to restore marketing margins to normal levels.

 However, an increase in refining margins — the difference between the price of crude oil and the value of petroleum products produced using crude oil in a refinery — may allow refiners to continue to absorb some impact of higher crude oil prices. Analysts have noted that the Center may also reduce excise duties on petrol and diesel, which are still above pre-pandemic levels, to reduce the impact of the high crude oil price on consumers. Central excise duty on petrol is still Rs 8 per liter higher than pre-pandemic levels, while excise duty on diesel is still Rs 6 per liter higher.

 In the case of diesel, the big difference between bulk prices and retail prices has already pushed bulk consumers to source the fuel from retail outlets.

 “There is a massive surge of demand at fuel stations (retail outlets) due to increased delta of Rs 25/LTR between retail and industrial price of diesel, leading to heavy diversion of bulk HSD (direct customers) to retail outlets. There is also very heavy lifting of fuel by dealers and both B2B & B2C customers, who have advanced their purchases to top up their tanks and capacities in anticipation of price increase which is overdue,” said a spokesperson of Reliance BP Mobility Ltd (RBML) which operates over 1,380 retail fuel outlets across the country.

 Sources at RBML confirmed that it had reduced the supply of both petrol and diesel at retail points as it was facing losses on their sales. When the price of crude oil hit record highs in 2008, Reliance was forced to shut fuel retail operations as it was not able to match the subsidized prices offered by state-owned OMC.

 Key bulk buyers of diesel, including the Indian Railways, factories, malls, transport companies, will face significantly higher prices than retail consumers. Diesel is primarily used by industries for gen sets for power backup and operation of mobile towers. Power backup will also become more expensive for housing societies that use diesel gen sets. An expert said higher prices for bulk buyers may disproportionately affect users of gen sets in tier-2 and tier-3 cities, as power supply is more reliable in tier-1 cities like Delhi and Mumbai.

 Last week, Union Petroleum Minister confirmed that the consumption of petroleum products had increased sharply in anticipation of the fuel price hike.

 Here’s what you pay for a liter of petrol and diesel in your city on Tuesday March-22-2022: