THE FUEL PRICE HIKE, UNDERSTANDING THE REASON
The prices are getting higher and higher for petrol and diesel in India and this is not a new trend. This trend is actually in seen since December 2020.
The lockdown hit India, and after March 2020 many travel restrictions were imposed not only domestically but also internationally.
People were restricted from travelling; the demand for petrol and Diesel fell. Internationally the prices of petrol the crude oil crashed to such an extent that the prices were not revised for a record 82 days.
After the lockdown when the economy tried to get back on track, the price recovery started, the oil prices companies began to increase the petrol and diesel prices.
Since November 20, 2020, just in 18 days, the petrol price went up to by rupees 2.65 per liter, simultaneously the price of diesel increased.
CONTROL OF OIL PRICES
Because of decontrolled prices on fuels, the oil prices were regulated by the government. In the year 2010, the government decided that they will not regulate the prices of petrol, but it would be done by the oil marketing companies and in the year 2014, deregulation got imposed on diesel also.
Since then, the oil marketing companies have revised the prices of oil every fortnight.
After June 16 2017, the revision of prices is being done on a daily basis to safeguard the consumers from any kind of fluctuation of the oil prices to contain the prices.
As the price control was carried out by the oil marketing companies, in order to increase the profit margins they did not pass the benefits of the lower crude oil on to the consumers.
GLOBAL CRUDE OIL PRICING
Global crude oil pricing depends on a lot of things. First is the global trend the international pricing, second is the freight charges, third is the exchange rate between the Indian rupee Vs the US Dollars.
WHAT IS OPEC?
OPEC is Organization of Petroleum Exporting Countries, it was formed in the year 1960 in Baghdad and is headquartered in Vienna, Austria, and the founding members are Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
The other reasons they controlled the production of Brent crude. The price of crude that was being traded at about 40 dollars per barrel between June to October and the year 2020, started rising in November, and it rose beyond 60 dollars per barrel. The supply was not meeting the demand, as the OPEC countries had voluntarily not produced oil to control the pricing.
TAXES AND DUTIES
The taxes are levied by the central government and the state government. The pricing of the taxation structure of our petroleum is not under the purview of GST, so the government has a lot to do in terms of pricing to get maximum revenue from petrol and diesel.
Petrol or crude oil is the most lucrative object In order to get revenue the central government prices of petrol and diesel, on the base price, VAT is added, the dealers’ commission, then the freight charge, which leads to the increase of the actual price that a person needs to incur.