Crashing crude propels petrol prices to a year low

It's time to fill your tanks and go on a long drive this holiday season as the fuel prices at the retail level are ruling at a year low.

The pump prices of the fuel have dropped to a level seen during the last Christmas as the crude oil prices plunged more than 6% to hit the lowest level of $50.73 per barrel in more than a year on Monday.

The prices of petrol stood at Rs 70.32 per litre on Tuesday in Bengaluru, 47 paise lower than the prices prevailed exactly a year ago. The petrol prices have seen a decline of 17% from the peak prices on September 17 when they stood at a record high of Rs 84.84 per litre.

On the other hand, the diesel prices in the city also stood at a year's low of Rs 64.15 a litre on Tuesday compared to Rs 60.37 a litre.

Similarly, in Mumbai, the pump prices of petrol stood at Rs 75.38 a litre, a drop of over 17.5% from the peak level of Rs 91.39 a litre on October 4 this year.

In national capital Delhi, the prices were at the lowest level since December 26, 2017. The prices in the city stood at Rs 69.71 a litre, down 17.1% from its peak of Rs 84.06 a litre on October 4 this year.

In the southern metropolitan city of Chennai, the petrol prices at the pump stations stood at Rs 72.38, a drop of 20.7% from the peak of Rs 87.39 on October 4 this year.

The drop in the pump prices has been fueled mostly by a steep decline in the prices of crude oil in the global markets.

The crude oil prices have been at an 18-month low in the international markets, owing to the supply-demand mismatch. At the close of trade on Monday, the benchmark Brent crude was trading at $50.73 a barrel, its lowest since July 2017. On July 25, 2017, the Brent crude was trading $50.20 a barrel. The crude prices have crashed by 41% in past two months after they touched a four year high of $86.29 a barrel on October 3 this year.

On July 25, 2017, when crude oil price was lower than the current price -- at Rs 65.75 a litre in Bengaluru. The petrol prices across all the other metros as well were 7-8% lower than the current price.

Analysts attribute the steep drop in the crude oil prices to the supply-demand mismatch. The shale oil production in the US has been at an all-time high despite the fact that the demand has stagnated.

Despite a steep decline in the crude prices, the pump prices have fallen by only half the rate of the Brent crude, owing to the multiple taxes imposed by both the centre and state governments on the fuel.

According to estimates, the basic cost of fuel after refining cost is not more than Rs 33 a litre, while the rest of the amount goes in the form of taxes. The various kinds of taxes imposed on petrol include excise duty, road cess as charged by central government and value added tax by the state governments.