Petrol, diesel price hikes lurching ahead, crude oil hits seven-year high

Petrol and diesel prices in India might have taken a backstep after reaching a record level last year, but there are chances of the motor fuel price surge again as crude oil prices have increased to their highest level at a seven-year high in the wake of the latest geopolitical tension in Eastern Europe.

Brent crude was down 11 cents or 0.1 per cent at $94.33 a barrel on 14th February, closer to $96.16 recorded in October 2014. US West Texas Intermediate (WTI) crude on the other hand rose one cent or less than 0.1 per cent to $93.11 a barrel on the same day, hovering near the previous high of $94.94 recorded in September 2014.

Crude oil prices have gone up by 25 per cent since the beginning of this year, but petrol and diesel prices have not moved in tandem. Both petrol and diesel prices have remained unchanged for 100 days in a row, which is the longest since June 2017 when the Indian government introduced a daily price revision strategy.

However, with 14th February being the last day of voting for five state assembly elections, oil marketing companies in the country are likely to announce price hikes in order to match with the increased crude oil pricing in the international market. The crude oil price in the international market is expected to remain high due to the tension between Russia and Ukraine. This means the pricing of petrol and diesel are likely to see an upward rally.

Petrol and diesel prices shot sky-high levels last year owing to the high excise duty imposed by the central government. Added to that the value-added tax (VAT) imposed by state governments and retailer commission also contribute to the retail price of motor fuels.

On November 4, the central government announced a cut in excise duty that resulted in a significant drop in oil prices. Also, several state governments announced a cut in their respective VAT rates, which further brought down the price of motor fuels across India. Since then the price of petrol and diesel remain unchanged providing slight relief to the common people including motorists. However, a price surge again will put pressure on them again.

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