Oil minister says petrol prices will come down soon

Oil minister Dharmendra Pradhan today said that the current spike in petrol and diesel price is ‘temporary’ and related to the impact of Hurricane Harvey in the US.

“The prices have gone up because some of the refining capacity has been shut down (in the US). It is temporary,” Pradhan said today, in response to concerns about the steep rise of petrol and diesel prices in recent days.

It is estimated that about 20% of the refining capacity in the US has been shut down due to hurricane Harvey, which lashed the southern state of Texas — the heart of US hydrocarbon industry — earlier this month.

As a result, petrol price in Mumbai is at Rs 79.48 rupees per liter, compared to Rs 73.25 two months ago, an increase of 8.5%.

In Delhi, they are at Rs 70.38 per liter, versus Rs 63.91 two months ago, an increase of 10%.

The rise in petrol and diesel prices has been due to a steady increase in the crude oil prices in the international market.

For example, the Brent futures has risen by 11.7% in the last two months to about 54.65 dollars per barrel.

Under a ‘free pricing’ policy put in place by the Manmohan Singh government, fuel prices are allowed to track international crude oil levels.

When present prime minister Narendra Modi took over in May 2014, crude oil price was around $103 per barrel and the central excise duty on petrol was around Rs 9.50 per liter.

By January 2015, crude prices had declined to about $49 per barrel, but the central excise duty was increased to about Rs 17.5 per liter.

By January 2016, the crude price fell to below $30 per barrel. However, consumers were not able to get cheaper petrol and diesel price as both the state and central governments continued to increase taxes on the products.

By January 2016, the central excise duty on petrol was increased to Rs 22 per liter — or about one third of the total price paid by a consumer at the pump. In addition, there were another Rs 12-20 of state taxes as well.

Starting from about June this year, crude prices again started rising from the $47 level, reaching the current price.

Pradhan said he did not want to cut taxes as the money was used for providing subsidies to the poor and to create roads and bridges.

“Will those who are asking for a price cut also ask for a cut in subsidy for the poor? Do they want roads to be constructed at the current pace or not,” Pradhan asked.