Inflated Fuel Prices in India

It is pretty shocking that we are one of the fastest growing economies in the world, yet we do not have the required transparency in the system. There are way too many grey areas in the way our government functions and the way various price indices are set.  One such case is of the Fuel prices in India.  When we actually look back at the Fuel Prices in India v/s the Global Fuel Prices, we find a lot of discrepancy in the way the Fuel prices are set in India.

I was shocked quite a bit when I revisited the trend of Fuel prices in India for past 10 years.  Let me depict my findings figuratively - 

Year	Crude Brent $/Barrel	Rs/$	Rs/Barrel	Barrel to Litre	Rs / Litre Crude	Petrol price in India Rs./ltr
Aug-04	44.9	44	1975.6	119.24	16.57	36.81
Aug-05	65	46.11	2997.15	119.24	25.14	43.49
Aug-06	73.1	44.49	3252.219	119.24	27.27	43.51
Aug-07	72.4	39.33	2847.492	119.24	23.88	43.52
Aug-08	116.6	49.82	5809.012	119.24	48.72	50.62
Aug-09	71	46.29	3286.59	119.24	27.56	44.63
Aug-10	76.8	45.09	3462.912	119.24	29.04	51.45
Aug-11	86.3	51.1	4409.93	119.24	36.98	63.7
Aug-12	94.2	55.45	5223.39	119.24	43.81	68.46
Aug-13	106.2	58.39	6201.018	119.24	52.00	71.28
Aug-14	98.15	60.56	5943.964	119.24	49.85	70.33
Aug-15	43.37	66.02	2863.2874	119.24	24.01	63.2

Table:1 Brent Oil and Petrol Prices Variation over 11 years

So, Now looking at the trend, the petrol prices in India should actually be in the range of Rs 43/ltr or Rs. 44/ltr.  But we are actually paying anything between Rs. 63/ltr to Rs. 73/ltr which is way above the mean price from the trend above.

What is the logic of this 50% price difference for Petrol from the 2004 to what they are today, when the Crude Oil is at the similar level as in 2004 with the cost of per ltr of crude oil being same as what it was back in 2005, 2006 or 2007.  Why are we paying a a higher rate?  Are we paying for someone else getting the subsidy?

Don't we think that if the prices actually get adjusted to the Actual Market levels, we would see lower cost of supply an logistics and thus lower rates of various consumables? I would love to see a logic and Facts and figures to beat the table depicted above else, we should actually be looking at a movement to get Fuel at par with Prevailing world market.

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Data Source - 

1. http://ycharts.com/indicators/indian_rupee_exchange_rate

2. http://www.macrotrends.net/1369/crude-oil-price-history-chart

3. http://www.mypetrolprice.com/2/Petrol-price-in-Delhi

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Note - In case you would be interested in reproducing the data depicted in this article, please contact Mayank by clicking here