Understanding the Factors Driving Continuous Increase in Petrol Prices

The continuous increase in petrol prices has been a topic of concern for many. Various factors contribute to this rise, each playing a significant role. This article aims to explore these factors, providing a comprehensive understanding of the situation.

1. Global Crude Oil Prices

The most significant factor influencing petrol prices is the global crude oil prices. From May 2020, when the price was just $19 per barrel to October 2021, where it surged to $83 per barrel, there has been a substantial increase. This rise in crude oil prices directly impacts the cost of petrol, as petrol is manufactured using crude oil. Such fluctuations are evident in the graph provided, showing the price trajectory from May 2020 to May 2021.

2. Shipping Costs

The cost of transporting goods, including crude oil, also plays a crucial role. For instance, Saudi Arabia has increased the price of oil shipments to Asia by between 20-50 cents per barrel. This increase is particularly notable for destinations like India, where the price has risen to $1.8 over the benchmark price per barrel. However, Saudi Arabia has maintained or even reduced shipping costs for customers in northwestern Europe and the US.

3. Currency Devaluation

The devaluation of a country's currency can also increase the prices of imported goods, including fuel. Since India imports crude oil in dollars, any depreciation of the rupee directly causes an increase in oil prices. This leads to higher petrol prices, as the cost of importing crude oil in dollars increases.

4. Large Taxes

A significant portion of the petrol price is attributed to taxes. In India, approximately 64–66% of the price paid for petrol goes towards tax. This is one of the highest tax rates in the world, further contributing to the higher cost of petrol.

5. Increase in Excise Duty

The COVID-19 pandemic had a negative impact on the economy, leading to a decrease in tax revenues. To compensate for the losses, the government imposed an increase in excise duty on petrol. This additional levy further drives up the final price paid by consumers.

Conclusion

In summary, the increase in global crude oil prices, high taxes, and excise duties are the main drivers behind the continuous rise in petrol prices. Additionally, the global shipping costs and currency devaluation also play significant roles. Understanding these factors can help consumers and policymakers better anticipate and address the challenges of rising fuel costs.

About the Author: Focused on SEO and digital marketing, our expert writer has analyzed numerous cases related to fuel prices and market trends, providing in-depth insights into how various economic factors affect consumer prices.

Related Topics:

Crude oil supply and demand Economic impact of tax increases Petrol price fluctuations in major economies