[alpha1]

Originally Posted by pgsagar

Can someone please enlighten how much petrol price should fall by, for per dollar fall in crude price? That is if, the benefit is passed on honestly to consumers. But I'm sure we are being taken for a ride by GOI-oil companies nexus. I don't trust their arithmetic.

1 barrel of oil (bbl) = 159 litres.

Now most refineries operate with gross refining margins of about $5-6/bbl.
Therefore $100/bbl crude price becomes $105-106/bbl product price.

Let us also add the amortization of the capital cost of the refinery.
The capital cost is usually about $10,000/bpd, amortized over say 10 years. (typical projects are built for 25 year life - but today the technology evolves rapidly so assuming 10 year of plant life it good enough)

Assuming I have a typical refinery of capacity 1,00,000 barrels per day (bpd) will incur capital cost of about $1 billion. Amortize this over 10 years.
Per year cost = $100 million.
Now in this one year period you will have 333 days running. (all process plants are assumed to have 8000 hours working per year and the rest is turnaround and maintenance). Therefore I would've processed about 33 million barrels. What is the per barrel cost?
Roughly $3.

SO, my total now becomes $110/bbl. This should be the price of the products. Petrol. Diesel. Kerosene. ATF. LPG. etc
However, the prices are market demand driven, therefore one product might be higher, the other might be lower. But the overall average should be this figure.

Each $100 crude price becomes $110 product price.
Now convert this to Rupees and litres.

$110/bbl = $.7/litre = Rs 42/litre.
Anything above this is tax and duty.
I don't recall what was the petrol price when the crude was at $100.
But roughly 50% on refinery gate price is the tax/duty. Therefore landed price for consumer becomes Rs 63/litre.

SO each dollar increase/decrease in crude should lead to 50-60 paise increase/decrease in price.

[pgsagar]

Originally Posted by poloman

Buddy, you can rant but please base that on facts. You should specify which country has cut petrol prices by 30%.
Here is the historical US gas price average which has come down by 23% last 6 months.
Please understand India gets its crude at much higher rates and dollar has strengthened in last 6 months. But with more cuts planned in petrol prices the % decrease in India will go even higher.
So please come out of this "always some one is looting me" mentality.
This is a phenomenon happening all over the world
http://www.theage.com.au/business/th...28-11vdcg.html

What are you? A GOI spokesperson? Do you think everything is right with Govt. in this country? I don't think so. May be I cribbed too much here but then that is because taxes and duties already make up most of the perol prices. I am sure you know that. Excise duty on fuel was once specific rate, I guess in late 80s or early 90s. GOI got greedy and made it ad valorem as it fetches them more with each price hike. May be you have a point in this issue but as fas as my remark about looting goes, I strongly feel that way because of the way we pay taxes on everything and VAT and service tax and what not. Look at life time tax on vehicles. When some northern states can only charge 6 to 7 per cent , why are southern states of AP (greediest), Karnataka and Maharashtra charging whopping 12 to 14 per cent? Is it not loot?

[Samurai]

Originally Posted by saurabhkum

If at 114$ of crude rate the petrol price was around 81, then at around 75$ the petrol should have dropped by 30%

Originally Posted by pgsagar

Crude prices fell by 30% since June but petrol price at retail only fell by roughly 15%. So either GOI or Oil companies are pocketing the difference. In other words, the loot continues.

You guys are looking at only the variable cost, that of crude. What about the cost of refining, distribution and transportation? That is a fixed cost, untouched by the cost of crude.

[S_U_N]

Originally Posted by pgsagar

What are you? A GOI spokesperson? Do you think everything is right with Govt. in this country? I don't think so. ..... Is it not loot?

I understand your reaction, however it seems an emotional outburst.
I would also love to have cheaper fuel (and I think everyone else on this forum and beyond will also be happy if that happens)

Every item that we import is typically a loss for the country, since the money goes out of the country. Oil import is about 1/3rd of the total import bill for India.
Unless we are able to reduce that import bill, we will keep bleeding.
Better rapid mass transport systems are the only viable solution for now.

Had we got a very efficient government (less corruption) and all citizens paying full tax for the last 50 years, the treasury would have surplus money.

Since that is not the case, taxing the oil consumption is the simplest way to get some money back in the Govt. coffers.

[vjjustin]

Originally Posted by alpha1

1 barrel of oil (bbl) = 159 litres.
...
$110/bbl = $.7/litre = Rs 42/litre.
Anything above this is tax and duty.
I don't recall what was the petrol price when the crude was at $100.
But roughly 50% on refinery gate price is the tax/duty. Therefore landed price for consumer becomes Rs 63/litre.

SO each dollar increase/decrease in crude should lead to 50-60 paise increase/decrease in price.

I am not sure why you did all that margin/amortization calculation. If 1 bbl=159 ltr, then $1 difference in bbl equates to $1/159 per ltr = $0.0062 per ltr = 39-40 paise per ltr. If tax is at 50% (I am not sure about this) then make it 60 paise.

So a 30 dollar drop in barrel equals 18 rupees drop per ltr. We already have around 10 rupees drop + tax increased last time; assuming a 2-3 rupees equals 12-13 rupees already. Add the 5 rupees drop rumor and there isn't much left.

Originally Posted by pgsagar

May be I cribbed too much here but then that is because taxes and duties already make up most of the perol prices. I am sure you know that. Excise duty on fuel was once specific rate, I guess in late 80s or early 90s. GOI got greedy and made it ad valorem as it fetches them more with each price hike.

Another aspect to this is the high tax previously was justified considering the huge oil subsidy bill that the government incurred. But now as these are mostly done away with why is the tax still remaining unchanged and why is no one asking/discussing about it?

Originally Posted by Samurai

You guys are looking at only the variable cost, that of crude. What about the cost of refining, distribution and transportation? That is a fixed cost, untouched by the cost of crude.

Hmmm, may be because it is fixed? Fixed cost is just that, ‘fixed’ and do not have an impact on price variations.

[alpha1]

Originally Posted by vjjustin

I am not sure why you did all that margin/amortization calculation.

1. Every refiner has a margin to earn. But as we see it is very low percentage wise compared to cost of crude.
2. Oil refining is a very capital intensive business. Again we see that amortizing it results in very low percentage compared to cost of crude.

[saurabhkum]

Originally Posted by poloman

As an informed individual you should have known when ever crude price cut happens or is reported in media it is not immediately passed on to countries like India.Some one has explained the logic above. So wait till 30th and if there is no cut still, you can complain. And do you really think a cut of 15% is not good enough in a country which is importing 80% of crude requirements with an import bill of over $140B? That is why i have given example of USA and Australia.

Come on... The cut is passed to all countries on an immediate basis. And haven't we all waited for last still many fortnights? Again for the sake of repeating and making you understand, my point is that if prices are deregularised the effect should be immediately seen. The same thing used you happen every fortnight when crude was climbing.
And according to your logic if international cruise price falls by 60% then what should be the fall in percentage in fuel price for our country and why? If 80% is import then it should be more related to the internationally crude rate.

[khoj]

What the U.S. pays for

http://www.txoga.org/assets/doc/Comp...Gas_Prices.JPG

[pgsagar]

Originally Posted by alpha1

Again we see that amortizing it results in very low percentage compared to cost of crude.

Exactly. Ammortized and depreciated value of all the capital goods must have come down drastically by now, after all, all the oil PSUs have been around since time immemorial. I would like to see GOI re-introduce specific rate of excise duty on petrol so that they let the prices move up and down freely. Present ad valorem rate makes them reluctant to lower the prices as they stand to lose revenue. Incidentally, no matter what they say, I firmly believe that it is GOI which is calling shots when to lower or raise prices. And they are very quick to raise retail prices when crude pricces move up but drag their feet when it falls. Naaw! I don't buy their deregulation stories.

[saurabhkum]

Petrol rates in Pakistan has been cut by more than 9 rs.

[i10]

Originally Posted by saurabhkum

Petrol rates in Pakistan has been cut by more than 9 rs.

That's equivalent to 5 INR. That aside, they do have far lower rates than India (approx. 55 INR to the liter)

[saurabhkum]

Originally Posted by poloman

Buddy, you can rant but please base that on facts. You should specify which country has cut petrol prices by 30%.
l

I never knew I'll be to answer this question so soon..... Anyways, as per the current news the Petrol Price in Pakistan from 1st Dec 2014 will be 84.53 Rs. In 2010 Feb the rate of petrol there was 71.21 which means and increase of around 19%. In Feb 2010 the price in Mumbai was 48.76 Rs while as on today it's around 72 Rs which is equivalent to an increase of 50%. Do you still think on 1st Dec 2014 price of Petrol will be 57 Rs ( Increase of 19% from Feb 2010) ? And before we start the currency discussion , the INR has lost by 29% an Pakistan Rs has lost by 22% so even if we add that 7% still price of petrol in Mumbai should be 61 Rs. Let's see what happens in next 24 hrs.

[bblost]

Fuel prices in Pakistan:

SHELL FUEL PRICES
Product - Super:
Price: 94.19 Rs/Litre

Product - Diesel:
Price: 101.21 Rs/Litre

Product - HOBC KHI:
Price: 118.31 Rs/Litre

Product - HOBC RWP:
Price: 116.45 Rs/Litre

Product - HOBC LHR:
Price: 115.64 Rs/Litre

http://www.shell.com.pk/

[ritz3645]

I think crude basket of India is cheaper as it is more Sour.

Just like Gas formula their is a formula by India's Petroleum Planning and Analyis Cell.

source:
http://www.quora.com/How-crude-oil-p...asket-is-fixed

Also found a press release from GOI.

Global crude oil price of Indian Basket was US$ 72.51 per bbl on 27.11.2014

http://pib.nic.in/newsite/PrintRelea...x?relid=112055

[poloman]

Originally Posted by saurabhkum

I never knew I'll be to answer this question so soon..... Anyways, as per the current news the Petrol Price in Pakistan from 1st Dec 2014 will be 84.53 Rs. In 2010 Feb the rate of petrol there was 71.21 which means and increase of around 19%. In Feb 2010 the price in Mumbai was 48.76 Rs while as on today it's around 72 Rs which is equivalent to an increase of 50%. Do you still think on 1st Dec 2014 price of Petrol will be 57 Rs ( Increase of 19% from Feb 2010) ? And before we start the currency discussion , the INR has lost by 29% an Pakistan Rs has lost by 22% so even if we add that 7% still price of petrol in Mumbai should be 61 Rs. Let's see what happens in next 24 hrs.

You are silent on the prices of Diesel, Kerosene and cooking gas in Pakistan. Diesel and Kerosene are costlier than Petrol. LPG in Paksitan is costliest in South Asia Now tell me how you will react if the LPG subsidy is removed or reduced to zero in India. It will be close to 1000Rs in line with Pakistan.
In short lot of cross subsidy is happening here even though Govt claim sector is being deregulated. So unless you deregulate the price of entire crude products, this kind of dilly dallying will happen.

In India a stable fuel price mechanism is always better since every one has habit of increasing prices if petrol/diesel prices go up. But the reverse never happens.

I am out of this discussion since this is not going to lead anywhere.