Reason Behind Petrol Price Hiked in India

The sharp petrol price hike is creating a hole in the market of India. Even though the COVID-19 situation has improved all over the world, the government seems to have lost control over the sharp petrol price hike. From April 22, 2020, the Brent crude oil has been increasing steadily. In 2021, the demand for crude oil has increased, which resulted in the high rise of prices in the Indian market. The OPEC+ group of nations has maintained the supply restrictions of petrol, which resulted in the high rise of prices. Another reason for the increase in petrol prices is due to the pandemic situation and the petrol producing economies continue with slow production.

Shortage of Gas in Europe and Asia

The main reason for the demand for oil power generation is that there is a shortage of gas in Europe and Asia. According to the international prices of these fuels, the price of petrol in India is pegged to a 15-day rolling average. Another important reason for the price hike of petrol in India is the high taxes imposed by the state and central government. As the opposition accused the government of looting the public, the fuel price hike drew fast criticism from it.

Higher Tax

The primary reason behind the price hike of petrol in India is because of reduced fuel production and oil-rich nations looking for more profit. Crude oil prices have risen to a near three-year high in India. As a result due to heavy tax rates, the retail prices of petrol and diesel became higher in India. The burden has been passed on to the consumers of India because of the high rise in prices of petrol and diesel during recent years. Crude prices have crashed on multiple occasions in late 2014. But this has not even touched on the reduction of the retail petrol prices in India. A parallel increase in retail price is always responsible for the increase in petrol and diesel prices in the Indian market. One of the main reasons for the sudden surge in petrol and diesel prices is the excise duty that the central government implements. The center’s share in retail price has increased many times after late 2014 while the state share in retail price has remained static. In 2020 when crude prices of petrol and diesel crashed due to a fall in demand and because of the covid-19 pandemic situation, excise duty was revised sharply in the upward direction during that time. In 2021 even though the crude prices of petroleum and diesel are on the top and rising, the hike in excise duty continues. The imports are yet to reach the pre-pandemic stage due to local movement restrictions, but the imports are significantly recovered from the pandemic lows.

Meanwhile, the consumption of high-speed diesel has not picked up whereas the demand for petroleum has increased in the Indian market. After the surge in excise duty, the center’s revenue has risen sharply in FY2021 and collected Rs 3.7 lakh crore in FY21. Meanwhile, the collection of the state was at Rs 2 lakh crore.

Brent Crude Oil Price Hike

Since 2018 the price of Brent crude oil has crossed the $85 per barrel mark and increased, resulting in the high price spike in petroleum and diesel in India. Although there is an overall increase in global crude prices, the key oil-producing countries have kept the supplies of crude oil at an increased production level. The price of Brent crude oil has surpassed the price of  $42.5 per barrel a year ago. Despite a sharp increase in prices in petrol and diesel the OPEC+ group of oil-producing countries assured that they would increase the total supply of crude oil by only 400,000 barrels per day. One of the reasons for keeping crude oil elevated is the low crude oil supply from the US. As the analyst of the Ambit Capital Vivekanand Subbaraman said, the crude oil-producing countries have cut off their supply when the prices of crude oil were low. It is yet to be seen when they would reopen their supply of crude oil.

The constant increase in petroleum and diesel in India is a serious threat to the country’s economy. As India recovers from the covid shock, the unprecedented high retail price of petroleum products remains a large concern for Indian citizens. India’s petrol and diesel prices are high by 100% and 150%, while the international crude oil price today is nearly 50% than it was in the year 2008.

Political Reasons

Keeping in view the dominated fiscal situation, the excise duty rates on petrol and diesel has been modified to generate a resource and other developments. Due to international up and down market and not to reduce the taxes of central government and state government the prices of petrol are increasing.

International Reasons

The international market governs the prices of fuel. Brent crude oil comes from the Europes north sea while WTI crude oil comes from the USA. The supplier of crude oil in middle east countries and Africa is OPEC. Today oil price of WTI crude oil is $80+, Brent crude oil is $80+ and OPEC Basket is $80+ the barrel can hold 158 to 159 liters. To get one barrel of crude oil India spends approximately 5500 rupees. Freight charges are also included in the price. It all depends on how much farther the exporter is located.


In the end, the petrol and diesel prices are so high that normal people could not get any advantage from it. But it is true that petrol and diesel prices have skyrocketed in these recent years. Due to look after in the businessman interest and political interference the petrol and diesel prices has risen to a certain degree. The hike in petrol prices has affected every people due to transportation costs rising a lot. In short, the total market had gone out of control from the hands of people.

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