Lately the fuel prices in India has sky-rocketed. Have you ever wondered why this could have happened ? Keeping aside the political criticism, let's see the real reason behind the rising fuel prices in India.

Firstly, let's understand what petrol and diesel are made off. Petrol and diesel are petroleum products produced from crude oil. Crude oil is a fossil fuel which is formed from the remains of plants and animals that have been crushed and heated between the layers of rock and sand.

Factors that caused the hike

1. India consumes nearly 211 million tonnes of oil every year out of which only 35 million tonnes of oil is produced in India. India imports nearly 85% of its crude oil. India doesn't have enough oil reserves and new oil fields have not been explored.

2. India as we all know has imposed a very high tax rate on fuel. As per Energy World, India has the highest tax on fuel in the world
3. The rising price of crude oil in the international market. Crude(WTI crude) has reached an average of $95 for a barrel this year, compared to an average of $68 in 2021 and $39 in 2020. Since, India imports nearly 85% of its crude oil, this change in the international price has a great impact on fuel prices

Conclusion:

The fuel rate is dependent upon the international crude oil rates as 85% of India's crude oil is imported. But the Government can take certain steps to ensure that the price is kept under control.

  1. Exploring for new oil fields in India. If we reduce our oil imports, the fuel rates will automatically come down.
  2. Divesifying crude oil imports, currently we are highly dependent upon Middle Eastern Countries for our Crude oil requirements. We should diversify and also look for cheaper oil imports.
  3. Reducing the tax on fuel. Even though the Government is dependent upon taxes for carrying out various welfare schemes, building public infrastructure, paying salaries and many other things. A reduction on fuel prices may reduce the inflation occuring in the country as the transport prices of product/services many reduce, lower cost of living along with many other benefits.
  4. Buying crude oil from cheaper destinations. India imported almost a tenth(23 million barrels of crude oil) of its oil requirements from Iran before Iran was hit by America's sanctions. Venezuela is also another attractive destination for oil imports. But both of these countries are currently under sanctions by the US.

sources:
NDTV
GoDigit
Afdc.energy.gov

You can contact Us: