Oil Prices in India have been soaring these days like anything. The retrospective of the price rise is better not debated. It affects the prices of everything. The government says, oil price rise is due to inflation, whereas oil price rise itself becomes a cause of inflation. A vicious circle in itself! And then we have the government giving subsidies on petrol and playing Robin Hood. But are the fuel prices actually worth so much? Let us have factual synopsis of the same.
Let's do a quick back of the envelope calculation: one barrel of oil has 42 gallons; at $ 60 / barrel that is < $ 1.50 / barrel; add about $ 5 - 7 as barrel refining costs / margin and may be another $ 2 / barrel as transportation / marketing / distribution costs; that takes the total add on to the crude cost of about $10 / barrel or ~ $0.25 / gallon. This makes a total of $ 1.75 / gallon at the pump! At Rs. 45 / USD (average, though it is much less now and was close to Rs. 48 3 - 4 years ago), this translates to Rs. 80 / to the gallon or ~Rs. 20 per liter! And, we were paying close to Rs. 48 - Rs. 50 / liter at the pump last year even when the fuel prices were close to 60 $ / barrel.
In effect India has had over $4 / gallon petrol prices for a very long time - even when the crude oil prices were at $ 60 / barrel - while these prices are just getting in the US! About 60 % of the price at petrol pump in India is excise / duties / taxes!
At crude prices of $ 60 / barrel, the price of petrol (gasoline) at the pump in the US was less than $ 2 a gallon a "true reflection" of the crude prices! And now oil is at $ 135 / barrel, the cost of petrol at the pump is touching $ 4 / gallon, again a "true reflection" of prices.
Regarding current high oil prices, it is really the speculators who are driving them up in addition to those who lost big time in the US subprime crisis who are trying to gain on commodities in an attempt to bail themselves out. Plus, of course, geo - politics also work. At the moment, the world is well supplied with oil - the massive volatility in the crude prices does not reflect the actual supply - demand scenario.
Very true... Instead of relieving the people of the rising prices, the Indian govt. is still more interested in retaining its own income from those taxes, etc.
Who cares about the Humongous losses incurred by the oil companies?