Stories
Crude Oil Not Sole Driver: Petrol-Diesel Prices Soar as Benchmark Hits 50-Month High
- •Petrol-diesel prices are not directly determined by crude oil but by Trade Parity Pricing (TPP), with its benchmark reaching a 50-month high.
- •The benchmark is calculated by adding the international market price of finished petrol/diesel (FOB Price) with shipping, insurance, customs, and port charges.
- •The average petrol benchmark surged to $133.05 per barrel in September, a 20% increase from August; diesel benchmark also hit a 4-month high.
- •Oil companies are currently losing 5 rupees per liter on petrol and 20 rupees on diesel due to the high benchmark, indicating potential price hikes.
- •Global factors like Russia-US tensions, drone attacks in Saudi Arabia, and blockades of sea routes are driving the benchmark's significant increase.
Key Questions Answered
Petrol and diesel prices in India are determined by Trade Parity Pricing, or TPP, which is based on the international market price of finished fuel rather than the cost of raw crude oil. Oil companies calculate this using the FOB price of finished petrol or diesel, plus shipping freight, insurance, customs duty, port charges, and a portion of Export Parity Price.
Due to the expensive international benchmark, oil companies are currently incurring a loss of 5 rupees per liter on petrol and a severe loss of 20 rupees per liter on diesel. Once these daily losses become unbearable, companies may shift the entire burden onto consumers at petrol pumps.
The benchmark is surging due to several factors, including tensions over Russian oil imports, a Houthi rebel drone attack on a crucial oil pipeline in Saudi Arabia, and the complete closure of the important Hormuz sea route where 20 percent of the world's crude oil used to pass.
