Fuel prices in all metro cities are rising again on the back of falling rupee which has made imports costlier. Petrol price today was hiked by 14 paise to Rs 78.05 in Delhi. In last 13 days, petrol price has gone up by 91 paise in the national capital. Petrol price had previously hit its highest level on May 29 when it reached Rs 78.43 a litre mark in Delhi.
Today's petrol prices in other metro cities are: Rs 78.05 in Delhi, Rs 85.47 in Mumbai and Rs 81.09 in Chennai. After hitting a record high, diesel is being sold at Rs 69.61 in Delhi, Rs 73.90 in Mumbai and Rs 73.54 in Chennai. Fuel prices have been on the rise since August 16 after the rupee dipped to its lowest value against the US dollar.
Petroleum prices, which are determined by the cost of crude oil in global markets, may continue to go up as the international markets are under pressure due the US sanctions on Iran and Saudi Arabia's decision to cut oil production. Iran - which is the second biggest oil exporter to India and the third-largest oil producer in the OPEC Group - is set to plunge into crisis once the United States' sanctions come into effect on November 1.
This year in May, Bank of America Merrill Lynch observed that the deteriorating conditions in Iran may push the crude oil prices to USD 100. The bank said that the Brent futures, which was hovering around USD 77 then, would reach USD 90 in the Q2 of FY 2019 due to significant cut in world inventories.
The US sanctions on Iran is not the only reason for India to be worried about a possible spike in petrol and diesel prices. Saudi Arabia too is contributing to keep the prices on an upward trend. The world's second largest oil producer has started cutting production just a month after agreeing to increase the output. In July, it cut its oil production by an average of 200,000 barrels per day - a move that is likely to create oil shortage in global market.
Earlier, France-based BNP Paribas had said that because of the US sanctions on Iran, oil production from the OPEC would come down from an average of 32.1 million barrels per day in 2018 to 31.7 million in 2019. However, OPEC in its monthly report said that the group's total output in the last month averaged 32.32 million barrels a day - up 41,000 barrels a day from June.
The increase in output was a result of oil producing countries agreeing to lift the cap on production. The prices of crude had fallen by more than half due to excessive supply and booming US shale production. The US, China and India had urged OPEC countries to increase the supply to prevent an oil deficit that could undermine global economic growth.
High prices of fuel have off-and-on triggered demands for a reduction in excise duty but the government had ruled out any immediate cut. The centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy value added tax (VAT) - the lowest being in Andaman and Nicobar Islands where a 6 per cent sales tax is charged on both the fuel.
The central government had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by 13.47 a litre in nine instalments between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.