Petrol, diesel prices may rise to new record levels in coming months. Here's why

The central government's decision to slash tax on petrol by ₹5 and by ₹10 on diesel on Diwali came as a much-awaited relief for people at large amid a string of relentless hikes in recent weeks. While petrol and diesel prices remain at record levels, many states too have announced a cut in VAT imposed on the two fuels. But the cheer may well be short-lived with indications that prices may once again climb in the months to come omnipresent.

Energy expert Narendra Tanjea was recently quoted by news agency as saying that prices of crude in international markets are expected to remain high. "Whenever there is an imbalance in demand and supply, prices are bound to increase. The second reason is the lack of investment in the oil sector as governments are promoting renewable/green energy sectors like solar power. Crude oil will be more expensive in the coming months. In 2023, the price of crude oil can rise by ₹100," he said.

India is a major importer of oil with 86% of its domestic requirements being dependent on foreign countries. The per barrel rate of crude oil in the international market, therefore, has an impact on the price of the two fuels in India, apart from other factors. Recent times have seen prices of crude rise as OPEC (Organization of the Petroleum Exporting Countries) look to reportedly throttle supply. US President Joe Biden has reportedly blamed OPEC and its allies for inflationary pressure.

At present, per barrel oil prices remain at well over $80 and Bank of America has even predicted it to touch $120 come June of 2022. Fuel prices, therefore, are at an all-time high in many countries, including India where it could continue with its upward trajectory.

In a world coming out gradually from the worst of the Covid-19 pandemic, revenue collection remains a priority. But high fuel prices tend to cause inflationary pressures as well and may not auger well for economies. It is a catch 22 situation but experts say a lasting relief is unlikely in the foreseeable future.

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