Why are Oil Prices in India Skyrocketing Despite Global Slowdown?

Why are Oil Prices in India Skyrocketing Despite Global Slowdown? With rising oil prices still at half their record high, the majority of people in the world are enjoying driving at an economical cost. But that’s not the case in India, where Oil Prices are more expensive than ever.

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Diesel, the lifeline in India, is the most used type of fuel; unfortunately, it is also the most expensive. Additionally, gasoline prices are extremely high too, making the fuel prices in India at an all-time high. India decided to lift control over the price for diesel and gasoline, almost 4 years ago. With the coming elections, the alarming fuel prices have gotten everyone’s concerns.

Oil Prices in India

In 2014 the world experienced, what is known as the ‘great global oil price slump’. This period greatly impacted the oil prices in India and the rates fell much lower than those set by the government of India. India then decided to completely remove the price controls and thus the oil prices in India came down. This was complemented by a tax on oil instead of the consumer’s receiving the entire reduction. When oil prices in India started rising again, the consumers were affected, as the tax was still in place.

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However, what impacts consumers most is India’s decision to stop the price control on diesel. This decision was taken to help the government reduce the pressure of fuel subsidisation. In 2014 the subsidies had increased to a soaring 9.6 billion US dollars. This was soon followed by removing the subsidies on diesel. The state-owned oil and natural gas manufacturers thus turned to selling fuel and crude oil t lower rates. This led to heavy losses for the state-owned manufacturers and the oil prices in India put them in heavy losses to balance the selling cost and the manufacturing cost.

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How can the Government manage the Oil Prices in India?

There are several options that the government of India may consider to better manage the rising concerns over the fuel and oil prices in India. The first is reducing taxes but this also means a hit to the revenues for the government. With a government like India, that is constantly trying to reduce the fiscal gap, reduction in taxes and lower revenues could impact overall development. Thus, the second and more practical solution is regaining the control over the prices – partially or completely. There are discussions going on between the government and the state-owned oil companies to share the pressure and ease it off the consumers.

Diesel is one of the most important of all fuels as it accounts for almost forty percent of all oil products consumed in India. Diesel also directly impacts the prices of the transportable goods and commodities. Thus diesel and oil prices in India directly impact the general public and daily cost of living for the majority of the people in India. From cars to scooters, transport vehicles and public transportation, India runs on Diesel.

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