Why are petrol and diesel prices spiking if the economy is in recovery?
Indiamainly relies on oil imports, which make up about 80% of its current oil consumption
- Rising oil prices also have a bearing on the Indian Rupee which reached a record low earlier this week
- India has a stated ambition of reducing its dependence on oil
On Tuesday, prices of petrol had risen for tenth day straight and as of Tuesday morning petrol cost ₹79.31 ($1.11) per litre in
Rising crude prices and falling rupee
India mainly relies on oil imports, which make up about 80% of its current oil consumption. Global crude oil prices have been on the uptick in recent weeks because of a supply shortage in Venezuela and rising demand elsewhere. Crude oil prices rose by $7 a barrel in just the last couple of weeks. Crude oil prices had been relatively stable earlier this year.
Meanwhile, the rupee has been in free fall in part because of the global oil prices and recent economic crisis in Turkey. On Wednesday, rupee posted a record low of ₹71 against the dollar. The value of Indian rupee has slipped by 10% since the beginning of the year because of fears of India’s increasing trade deficit and rising global oil prices. A weak rupee also makes it more expensive to import goods and commodities priced in US dollars.
Last year, India shifted to the practice of revising fuel prices on a daily basis from an earlier practice of reviewing twice a month. The former was enacted by
What about alternative fuels?
India has a stated ambition of reducing its dependence on oil with the government aiming to have 30% of cars running on electricity by 2030.
Biofuels derived from vegetable sources is another potential alternative however the supply currently lags because of limited availability of raw materials.
The Indian government has also been pushing for the adoption of biofuels for many years and in 2003 set the target of blending petrol and diesel with 10% of ethanol sourced from