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Why Petrol Prices Exceed Diesel Costs

Petrol is higher priced than diesel and kerosene due to its higher position in the distillation column during crude oil refining. Diesel is more subsidized by the government as it provides better mileage and is used more for transportation and farming. Petrol consumption exceeds domestic supply in India, requiring import of 80% of fuel and leading to higher taxes of 52% on petrol versus 31% on diesel imposed by the government. International crude oil prices, set by major exchanges, and production policies set by OPEC also contribute to higher petrol prices in India.

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Paresh Kharadi
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112 views7 pages

Why Petrol Prices Exceed Diesel Costs

Petrol is higher priced than diesel and kerosene due to its higher position in the distillation column during crude oil refining. Diesel is more subsidized by the government as it provides better mileage and is used more for transportation and farming. Petrol consumption exceeds domestic supply in India, requiring import of 80% of fuel and leading to higher taxes of 52% on petrol versus 31% on diesel imposed by the government. International crude oil prices, set by major exchanges, and production policies set by OPEC also contribute to higher petrol prices in India.

Uploaded by

Paresh Kharadi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Why PETROL price is higher then Diesel and kerosene?

Reason behind high price of petrol


PROCESS:PETROL COST ALSO HAS THE AFFECT OF ITS MAKING OR DESTILLATION PROCESS OF CRUDE OIL. LOWER DOWN THE DESTILLATION COLUMN WE WILL FIND ENGINE OIL, THEN HIGHER UP OR CONTINUE THE PROCESS WE WILL FIND DIESEL, AFTER SOME MORE STAGES WE WILL FIND PETROL.

Effect over Inflation

India is the one of the few country where Petrol is expensive than Diesel. Diesel engine gives more mileage. Therefore diesel is highly subsidized by Government and used by state transport, farmers & private transport . Inflation in India has a direct relation with Diesel price.

3 main factors responsible for fuel price:

Purchase of crude oil. Industry margin(eg:transport, insurance, refining and other cost). National government taxes.

GENERAL ASPECTS FOR THE RISE IN PETROL PRICES

PETROL CONSUMPTION IS MORE THAN AVAILABLE RESOURCE (ALMOST ALL MOTERBIKES AND 70% OF CARS RUN ON PETROL IN INDIA). 80% FUEL IS IMPORTED FROM OTHER COUNTRIES. LEADS TO PAY HEAVY TAX AND DUTIES. 52% TAX ON PETROL AND 31% ON DIESEL IS APPLIED BY GOVERNMENT.

Price of crude oil is set by movements of three major International petroleum exchange:

NYMEX (Newyork monetary exchange). IPE (International petroleum exchange in london). SIMEX (Singapore International monetary exchange).

The oil and energy ministers of OPEC member countries meet atleast twice a year to co-ordinate their oil production policies. They make decisions about the future balance between supply and demand.

Thank You

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