[Fordmanchau]

Originally Posted by vishnurp99

Even if the diesel prices are deregulated the diesel prices will only rise by 9 rs for the current international prices. Petrol will continue to be around 20 Rs more because of differential taxation. Petrol prices are also not fully deregulated right now. Oil companies continue to make around 5 rs loss per litre of petrol even after the humongous hike.

Small Correction.
Oil companies are losing 18/- on diesel and 10/- on petrol(before Rs. 5/- hike) for every litre sold.
So, if the prices for both of them are completely deregulated and if they are taxed at par, they might just cost equally.

[vishnurp99]

There was an ET article which is on what i based the 9 rs figure. The government has never talked about eliminating differential taxation between petrol and diesel according to my knowledge. The only idea which has been mooted is to deregulate the diesel prices. So talk about petrol and diesel being taxed at par is purely academic.

@FordManchau how did you arrive at the 18 rs loss for the oil company.

[vharihar]

Originally Posted by Delta Wing

This gives a calculator for the running cost of a vehicle and a means to compare two sets of two vehicles.
...
Hope you guys find it useful. It sure changed me totally from wanting a petrol car to a diesel car. Cheers.

-Hrish

Very nice effort. But I dont see maintenance/servicing costs included in this comparison. I have heard that diesel cars are costlier to maintain. Is this true? Is the difference small enough to neglect?

[dot]

@Deltawing, great efforts. There is no doubt that a Diesel makes more financial sense compared to Petrol. Even if they are priced similarly someday, a diesel will make more sense as it is more efficient.

I have only one point to make. Its probably OT in the beginning, but kindly be patient.

For deregulated petrol to cost Rs250 per liter Crude futures will be in 350-400$ per barrel range. For that to happen Dollar, against which crude is pegged, has to lose value completely. i.e inflation strikes the dollar. Alongside Rupee also loses its value. While that might actually happen much sooner than we think, Crude futures may not go up as commodity prices will take a hit since there will be dearth of demand. Further if alternate supplies of hydrocarbons like shale becomes a dominant force due to ramped up supply, it will certainly cap crude prices. So I feel inflation adjusted petrol prices may actually never touch such rates. I am no economist or foreseer, it is just my theory.

If petrol prices and diesel never touch such levels, the savings will be continuous and not increase linearly. It might be continue to be around 40-60k per annum for a diesel car (10-12k Kms p.a.).


If we forget crude, dollar and world demand and supply and apply simplistic inflation rules and say that fuel prices will go up as inflation is 8% p.a. in
India. Like your friendly investment banker or advisor says that child education will be in tens of lakhs by the time you retire or you would need Rs 10000000 per month in 2040 if you are spending is Rs30000 per month now.
But lets not forget salary or monthly income will also grow in lock step.

15 years back a fresher used to land a 10k per month job and it was a big thing. Now a fresher lands up 30-40k per month. Thats 3-4x increase. Petrol prices in 15 years has gone by ~2x.

So affordability has increased. I feel it will continue to increase.

[libranof1987]

Just as this thread discusses :

Demand for petrol cars may be hit on high fuel price - The Times of India

[psbali]

Originally Posted by vishnurp99

Even if the diesel prices are deregulated the diesel prices will only rise by 9 rs for the current international prices. Petrol will continue to be around 20 Rs more because of differential taxation. Petrol prices are also not fully deregulated right now. Oil companies continue to make around 5 rs loss per litre of petrol even after the humongous hike.

dude that is what the Govt tells us that Oil cos are losing 5 rs on petrol.

just have a look at this

Times of India Publications

at the moment. Our nation is not at loss by selling petrol or diesel at current rates. what bothers me the most is how the govt keeps playing the fallen hero every time by declaring losses on sale of both the fuels. the tax on fuels also increase with any increase in fuel prices. there should be a set tax that should not go above a certain figure.

dunno if this is completely on topic but felt like sharing it..


edit:- also diesel having a higher weight age in calculation of inflation if crude does increase over time then govt will have to cut more taxes on diesel if not completely that would always keep diesel on the lower side in India.

so buying a diesel vehicle would save you money no matter what in the long run..

though after going through that calculation dont you guys think that taxing an essential commodity @ 50% to 60% too much??

[Fordmanchau]

Originally Posted by vishnurp99

@FordManchau how did you arrive at the 18 rs loss for the oil company.

Vishnu, here is the text and the link, it talks about losing 16/- on a litre of diesel, but I am sure I have read that oil companies were losing Rs. 18/- per litre on diesel before the latest petrol price hike.

The net result is that the oil marketers are estimated to have run up a loss of Rs 180,000 crore in 2010-11. Last heard, they were losing about Rs 8.50 a litre on petrol, Rs 16.76 a litre on diesel, Rs 29.69 on kerosene and Rs 329.73 on a cooking gas refill.

Fuel price hike likely next week - The Times of India

And I am aware that there is no talk of tax rationalization , but I hope this would happen sooner or later.

EDIT: Read this link at how Government is shooting itself in the foot.
http://timesofindia.indiatimes.com/c...ow/8398340.cms

It's not long when government will be compelled to deregulate even diesel prices too. And also, diesel is more polluting than Petrol.

[Delta Wing]

Thanks for your replies guys. I hope some expert on oil and economy can shed some light on fuel price trends.

Originally Posted by GTO

As you rightly said, the breakeven period for a diesel car has fallen.

I'm working on some actual historical data now to validate the assumptions. Will post the results soon.

Originally Posted by phamilyman

If one wants to just buy cars based on projected savings and excel sheets instead of real world drivability & driving pleasure - may I suggest you buy your next car as a tata Diesel? heck - why buy it at all, I am sure we can cook up calculations that show that under 12k/year - its cheaper to rent than buy. Why even buy at all?
A Tata Diesel is a good option to buy indeed. For a change, why don't you cook up the calculations for that cheaper rental plan for us all to eat?
Lastly, like a certain gent by the name of anupmathur once said - buying cars is an emotional process. You cannot put the price on fun. Why buy fancy phones? Buy an el cheapo 1000 rs simple phone to call, no? Saves 15-20k/year clearly.
Buying car may be an emotional process but it is not only an emotional process for majority of the buyers. You cannot drive at the redline all the time and majority of car drivers will never even take the needle anywhere close to redline. As for the cliche of fun being priceless, it is precisely to know if the fun is worth the moolah that these calculation would be made by buyers.
Bah.
Ha!

Replies in bold above.

Originally Posted by Fordmanchau

...he has only considered fuel cost as a major component for arriving at his results and that's not a fair comparison IMO.
We all know there are many other factors that affect the ownership cost of petrol and diesel. Let's not even talk about the maintenance cost but atleast take into consideration the additional interest cost on the difference of price between diesel and petrol cars, may be at the rate of 13-14%.
Also, it would not be prudent to assume that petrol cost will increase 10%/5% every year.
As of now it might seem a practical assumption, but going forward as we truly progress to market economy, we might find that taxes are rationalised and both diesel and petrol are almost priced similarly.
Please keep in mind that processing cost of both the fuel is same and if the govt actually cuts taxes and deregulates the price of diesel and other fuel. We might just find that diesel is costlier than petrol as is the situation in other matured markets of the world due to market forced conditions.
Although a very good attempt to get a rough idea of the running costs but it is still far away from the ground situation and disconnected to the market conditions, I would say.

You said it yourself right there. Ownership cost! My calculations are for running cost only which is one of the three factors in ownership cost, the other two being initial purchase cost and maintenance cost. The other two are more or less known to us in advance. As for the interest on difference between petrol and diesel purchase cost, I'll say the interest also applies to the cumulative savings you make every year with diesel. Since inflation affects both equally, the comparison is still valid.
I doubt that the government will have the power to deregulate diesel any time soon.

Originally Posted by mayankjha1806

Question, most D's are about 1.5L more expensive than their petrol counterparts. Once i do the math my break even comes close to year 6. Is it than advisable to still go for Diesel?

If you intend to keep the car for more than your break even period, why not?

Originally Posted by Newpunter

Seems like for my limited running ( I have managed a paltry 4K kms in nearly a year of owning my car ), Petrol still makes sense, without even considering the extra EMIs and interest on a Diesel car.

I think you'll be surprised that even with 4K km/yr and the added interest, you'll still break even in around 10 years. Your point is taken though, break even is quite far removed in future to weigh that much on the buying decision.

Originally Posted by neel385

...that diesel burners give better mileage has another significant advantage. Its good for the planet. With the expendable income all over the world, specially the third world rising significantly, the number of vehicles on the roads are only going to increase thereby putting greater strain on the environment. Hence this itself is good reason to go diesel.

I won't be too sure of the environmental friendliness. Diesels are more efficient but are more polluting than petrol in some ways (release of NOX, particulates etc). The sheer scale of diesel use (in industry, shipping, railways and heavy transport vehicles) might dwarf the benefits against petrol in carbon emissions etc. The debate round the world on this issue is far from conclusive. With tighter emission control in petrol engines these days, petrol cars don't face much threat from diesel cars in developed countries where there is minimal disparity in prices.

Originally Posted by dot

For deregulated petrol to cost Rs250 per liter Crude futures will be in 350-400$ per barrel range. For that to happen Dollar, against which crude is pegged, has to lose value completely. i.e inflation strikes the dollar. Alongside Rupee also loses its value. While that might actually happen much sooner than we think, Crude futures may not go up as commodity prices will take a hit since there will be dearth of demand. Further if alternate supplies of hydrocarbons like shale becomes a dominant force due to ramped up supply, it will certainly cap crude prices. So I feel inflation adjusted petrol prices may actually never touch such rates. I am no economist or foreseer, it is just my theory.

If petrol prices and diesel never touch such levels, the savings will be continuous and not increase linearly. It might be continue to be around 40-60k per annum for a diesel car (10-12k Kms p.a.).


If we forget crude, dollar and world demand and supply and apply simplistic inflation rules and say that fuel prices will go up as inflation is 8% p.a. in
India. Like your friendly investment banker or advisor says that child education will be in tens of lakhs by the time you retire or you would need Rs 10000000 per month in 2040 if you are spending is Rs30000 per month now.
But lets not forget salary or monthly income will also grow in lock step.

15 years back a fresher used to land a 10k per month job and it was a big thing. Now a fresher lands up 30-40k per month. Thats 3-4x increase. Petrol prices in 15 years has gone by ~2x.

So affordability has increased. I feel it will continue to increase.

A very very valid observation dot, thank you for bringing it out. I'm not well versed with crude economy either. But seeing the crude trends, the prices and futures in crude have risen and erratically no matter what the experts predicted. Remeber a few years back when crude stayed steady above 100$ a barrel?
About the OT on affordability, salary increases or not, diesel remains more profitable to run than petrol. I'll try and work out another possibility of global crude remaining stable at current prices.

[dot]

@Delta Wing, There is no doubt whatsoever that diesel makes financial sense.

Originally Posted by Delta Wing

Remeber a few years back when crude stayed steady above 100$ a barrel?
About the OT on affordability, salary increases or not, diesel remains more profitable to run than petrol. I'll try and work out another possibility of global crude remaining stable at current prices.

I will look forward to your analysis where crude stays at the current levels. Here are some charts which you might have seen. First one is from 1861 to 2008 at realtime prices (dark maple green) and inflation adjusted 2008 prices (light sunshine green) before it hit peak of 146$/bbl. The second one is from 2008 to (almost) current. The inflation adjusted chart is very interesting. It tells that in all of its 160 years history, only in 2008, crude managed to break the 110$ resistance levels, but retraced back almost immediately.





Disclaimer: The charts were taken from the net.

[Fordmanchau]

Originally Posted by Delta Wing

I'm working on some actual historical data now to validate the assumptions. Will post the results soon.... I'll try and work out another possibility of global crude remaining stable at current prices.

Deltawing, looking forward for your detailed results sheet. But try and take a wholistic approach. A calculation just on the basis of fuel price differences can be misguiding.

Originally Posted by Delta Wing

As for the interest on difference between petrol and diesel purchase cost, I'll say the interest also applies to the cumulative savings you make every year with diesel. Since inflation affects both equally, the comparison is still valid.

True, interest also applies to the savings, but then if you intend to go such deep into your study, then you might also consider the interest foregone on the price difference that you paid up, along with the extra interest burden. And there you would realise, how complicated it would get.

Originally Posted by Delta Wing

I doubt that the government will have the power to deregulate diesel any time soon.

Okay, now if government wouldn't do it, then who would. I am quoting from the link I have given above in my post.

These are the words of Anumita Roy Chowdhury, Director of CSE's Right to Clean Air programme

"The policy(of incentivizing the diesel i.e) is also completely pro-rich. Two-wheelers are available only in petrol models while it is cars and SUVs that can be bought in diesel models. The Indian market, so far dominated by small cars, is steadily shifting towards the mid to large car and SUV segments. On-road surveys carried out by RITES and the Delhi Transport Department show that nearly 30% of the cars on Delhi roads are already mid-size and large cars. Cheaper diesel, compared to petrol, will impel people to buy more diesel cars that have bigger engines and use more fuels."

Other very important point.

The policy of incentivizing diesel also has economic repercussions for the government. The Centre earns much less from excise on a litre of diesel as opposed to petrol. "Revenue losses per litre of diesel will be compounded with an increase in diesel car sales. The government imposes less taxes on diesel and controls prices by paying for the under recoveries so its use for luxury cars in unacceptable," says Roychowdhury.

Now, the environmentalists have raised their head, slowly economists and people from other walks of life will also slowly rise. The pressure on the Government is building up now and even they know themselves how skewed the policy is. This is certainly not sustainable in the long term.
It's just the question of WHEN rather than IF.

[avisidhu]

Another X factor that works in favor of Diesel vehicles: that sinking feeling you get every time you get petrol filled, knowing that the same amount of diesel would have cost half the amount, and would have driven more KM's as well !!
And yes, Diesel actually costs half the amount, in Punjab at least(Rs 36 vs Rs 70).

Shelling out an additional 70-80K in the start is comparatively less painful, IMO

[phamilyman]

I am still lost about this whole hype of the awesome work by DW - its nice no doubt, the scenarios are interesting. But its long known - diesel has lower taxes even if deregulated, and is more efficient (mileage). Thats why the scenarios show what they do - There I told it in one line

But folks, wake up - its an old discussion, same old calculations:
http://www.team-bhp.com/forum/indian...vs-diesel.html (2008)
http://www.team-bhp.com/forum/indian...tml#post362920 (Jan 2007) - very decent and detailed calculation.

The data is all out there for donkey's years. I refuse to understand the wows and the eurekas. Or is it that people are not searching hard enough of late?

@others: government is robbing US - the oil companies make losses, which are made up by oil bonds, which are paid out by TAX - as a complete non-frauding tax payer, I am VERY pissed. I want deregulation. Enough of this nonsense.

[kiku007]

Originally Posted by phamilyman

There are two things :
a. The numbers (essentially two synthetic scenarios) say one thing - perkm petrol costs 2.5rs more. Hence, with 16k+/year in a C segment it makes more sense to buy a diesel. given a diesel engine costs 1.1L more. Which we anyways knew
b. If one wants to just buy cars based on projected savings and excel sheets instead of real world drivability & driving pleasure - may I suggest you buy your next car as a tata Diesel? heck - why buy it at all, I am sure we can cook up calculations that show that under 12k/year - its cheaper to rent than buy. Why even buy at all?

Lastly, like a certain gent by the name of anupmathur once said - buying cars is an emotional process. You cannot put the price on fun. Why buy fancy phones? Buy an el cheapo 1000 rs simple phone to call, no? Saves 15-20k/year clearly.

Bah.

Excellent post!

This thread will be useful for people for whom buying a car may not be as emotional for petrolheads and help them take a calculated decision (To the last penny. However there are already threads for it). If you drive more than 15K/Year and want to save money, buy a diesel. Period.

So let them save money on petrol, invest on the second house they build for their son, who's going to settle abroad and never going to live in that house and so on this cycle continues.


And ha yes, if the intention is to save fossil fuels, I salute the diesel fellas for saving some more petrol for future petrolheads. We need you!

[goandude]

Originally Posted by mayankjha1806

Awesome work.

Question, most D's are about 1.5L more expensive than their petrol counterparts. Once i do the math my break even comes close to year 6. Is it than advisable to still go for Diesel?

if you look here
Maruti Swift Price in India - Latest Maruti Suzuki Swift Cost
for the popular swift vxi vdi the difference is only 70 k so your break even comes down to about 35,000 kms

[dot]

Originally Posted by phamilyman

But folks, wake up - its an old discussion, same old calculations:

Agreed, but price hike to 70+Rs is unprecedented and new, so why not a fresh discussion?

Originally Posted by phamilyman

I am VERY pissed. I want deregulation. Enough of this nonsense.

Me too.