There is a rumor going around that the upcoming fourth Petroleum Product Market Price Index (PPI) hike by the government will result in an increase in petrol prices. This has been dispelled time and again by oil companies. The current price level of petrol is not yet considered to be at the level that will result in price hikes of this magnitude. The fact is that there is no need for any increase in petrol price. Let us look at some of the reasons why the hike in petrol price in India may lead to price increases in the near future. This article is about Why There Is Increase In Price Petrol In India?
Cost of Gas is Increasing
With declining crude oil stocks, the cost of gas is increasing and the demand for it is also rising. India’s dependency on crude oil is now at its highest level since the Second World War I. It was then that petroleum supplies were limited and the price was regulated through the control of crude oil prices. Today the situation is completely different. India is dependent on imported crude oil and its production has been falling sharply over the years.
When prices of crude oil rise, motorists pay more money to fill their cars. The hike in petrol price in India could act as a deterrent for buying expensive cars. People save their money and buy cheaper cars which reduces fuel consumption. This will help reduce petrol emissions and this will in turn help save the environment from further damage.
Refinery Pricing System
The price of petrol and other fuel products are regulated through a mechanism called the Refinery Pricing System (RPS). If the price of petrol increases, retailers get an increment in their profits. This increment in profits results in a hike in petrol price in India as well. However, the impact of the hike in petrol price in India is indirect in nature.
If there is a hike in petrol price, the consumers of fuel also feel the pain of increased cost of buying fuel. This is because they pay more for fuel; as they have to pay a bigger amount of money to the refineries for the fuel. Consumers who use very costly cars find it difficult to make the monthly payment for the same; as the cost of repairing the car increases. Similarly, if there is an increase in the price of the gas, the cost of driving your own vehicle increases; and this may become a problem for people who are not able to make the monthly payments for their vehicles. This is a problem that has been witnessed in several countries around the world like Japan, UK and Australia.
Reasons behind this hike
There are many reasons that have led to the occurrence of this problem. In the US, the price of petrol and other fuel products were hiking because of the rising price of oil. At the same time, there was a lack of storage capacity for the fuel in the country. Some US refineries had found it impossible to handle the extra demand for petrol. In these circumstances, consumers in the country had to face problems and petrol pump was the first victim of this problem.
Petrol Price Increase in UK and India
However, it is not only the US where the petrol pump is the victim of the hike in the price of the fuel. In UK, the situation has become much worse; as the hike in the price of petrol has lead to a lot of problems for many motorists. The petrol pump in Mumbai has a regular problem with many motorists; and this is because the transport network has become very poor due to the increased demand for the fuel. At present, there are hardly any good stations close to Mumbai; many of the drivers have been forced to wait for hours in order to fill up their vehicles. This has caused the problem of increased wait time at the petrol pumps and this has resulted in the reduction in the efficiency of the fuel pump.
Increase in Petrol Price in India
However, this problem has not been experienced in India and the market is seeing a hike in the price of petrol at the pumps. The reason behind this price hike is the deteriorating financial condition of the economy of the country. However, the government has taken all measures to ensure that the petrol pump is not the only victim of the price hike. They have also planned to increase the rebate rate on the diesel, which has resulted in reducing the price of the fuel in the markets. With these efforts being made by the authorities of the country, it is expected that the price of the fuel will be able to come down soon.
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