Here are some numbers -
Fuel price break up.
Source.
Brief research on a barrel of
fuel.
One barrel of fuel = 159 liters of oil (approx).
Cost Per Barrel, assuming 75INR = 1USD
At $35 / Barrel = 2,625 INR
At $45 / Barrel = 3,375 INR
At $55 / Barrel = 4,125 INR
With one barrel of oil, you can produce all the below:
- 73 liters of petrol
- 36 liters of diesel
- 20 liters of jet fuel and heavy fuel
- 6 liters of propane
- 34 liters of other products (Butane, Asphalt, Sulphur)
Using the above, you can make your own calculations - permutations and combinations of costs. I do not know the exact price and uses of propane and other byproducts. So cannot fully comment.
Below graph shows, that after 2014, crude oil prices has mostly resulted in a drop. Added to that, fuel subsidies (on petrol was removed before 2014) on diesel were removed after 2014. Essentially, government did not have to pay subsidy + increased taxes + pocketed the gains from falling crude oil prices.
We now achieve a wonderful distinction of world's highest taxes on fuel prices. Cheers to that!
Source for above two graphs.
Now, the scary part. Something that worries me. After the lows that crude oil prices tested about 10 days ago, oil prices are going up and are recovering. Indian retail price is calculated based on 15 day average of crude oil prices. Now, when the low point of USD $19- $20 goes out of that range, i.e, say by May 15th on wards, and if fuel prices stay at current level (currently at $32), or worse still increase beyond $32; the average price for last 15 days will go up. Meaning, retail price of fuel will go up. So the sweetener on the bitter bill of duty hike, will start to wane. But, most of us will forget and move on in life.
Source.
Now, few questions -
1. Are we fine paying almost 70% of something that we buy regularly as taxes? And not even ask a question about it?
2. Is there an upper cap on retail prices of fuel? Or we just cough up whatever is asked for?
3. During times of economic depression, which India is undergoing, (lockdown further pushed India to bigger challenges); economists, industrialists, commoners and market participants argue for increase in spending capabilities of populations. This is to revive demand. During such a scenario, sucking more money out of everybody's pockets - is it prudent?
A former Harvard economics professor, who has co authored multiple research papers, and is also present government's MP in Rajya Sabha thinks
No.