Gasoline and diesel prices could rise as global oil prices rise to record highs

State-run fuel retailers may soon raise gasoline and diesel prices due to rising international oil prices, ending month-long relief for consumers – initially due to small cuts price, then holding prices at the pump for about two weeks, people in the know said.

Retail gasoline and diesel prices are likely to be affected by soaring international oil prices which have risen by around $ 3 a barrel over the past 10 days, the people cited above said. on condition of anonymity.

“In the event that international crude oil prices continue to remain at such high levels, an increase in retail prices in the future will be inevitable,” said a person working at an oil company.

Benchmark Brent crude jumped last week to $ 75.34 a barrel at Friday’s close, a jump of more than 9.1% from $ 69.03 a month ago.

As international oil prices fell below $ 70 a barrel in mid-August, fuel retailers slashed diesel prices by 20 pounds per liter on August 18 after an all-time high of 34 days. Gasoline prices were also slashed by 20 paises per liter on August 22, after maintaining a record high of ??101.84 per liter in Delhi for 36 days.

Subsequently, gasoline and diesel became cheaper in small doses of 65 paise per liter and ??1.25 per liter, respectively. After that, the prices of the two fuels have remained frozen since September 6. On Sunday, gasoline was priced at ??101.19 per liter in Delhi and diesel at ??88.62 per liter.

According to the people mentioned above, international crude oil prices have increased due to low US oil production due to Hurricane Ida which ravaged the Gulf of Mexico and high demand for optimism about global economic growth.

“Businesses kept prices going and expected government tax relief in terms of GST [Goods and Services Tax] relief, but the proposal to include petroleum products in the GST was rejected at the GST Council meeting on Friday, forcing companies to think about raising fuel tariffs, ”said a second person quoted above .

International oil prices, which are often volatile, directly influence gasoline and diesel pump prices in India. Heavy central and state tax burdens are also responsible for the astronomically high rates of automotive fuels.

Until 2020, as world crude prices plunged (below $ 20 a barrel in April last year), the central government increased excise taxes on fuel to shore up its finances. States have also followed suit as their revenues have been affected due to the Covid-19 pandemic. As a result, central and state taxes on gasoline and diesel represent more than 50% of their retail prices.

According to official data, the oil sector has contributed ??371,726 crore of central excise revenue in 2020-2021, and ??202 937 crore of public levies or value added tax (VAT).

Due to the high incidence of taxes and soaring international oil prices, gasoline and diesel prices have reached record highs ??101.84 per liter and ??89.87, respectively, as of mid-July of this year. While prices softened a bit in mid-August, a further hike in auto fuel rates is expected as international crude prices move north again and the value of the rupee depreciates against the dollar.

India imports over 80% of crude oil which it processes and pays for in dollars. In Delhi, central levies account for over 32.5% of the price of gasoline and state taxes (VAT) 23.07%. On diesel, central excise duty is over 35.8% while VAT is over 14.6%.

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