Petrol Diesel Price Hike: Petrol and diesel prices may increase by Rs 5-7, know why experts were shocked?

Business Desk- Petrol Diesel Price Hike: Amidst the rising prices of crude oil and the ongoing tension in West Asia, the prices of petrol and diesel are likely to increase in the coming days. Anindya Banerjee, Head of Currency and Commodity Research at Kotak Securities, says that petrol and diesel may become costlier by Rs 5 to 7 per liter for common consumers. Apart from this, an increase in the prices of LPG and CNG may also be seen.

He said that although the government and oil companies have tried to provide great relief to the general public till now, the increasing and continuous pressure is making it difficult to avoid the increase in prices.

Who is bearing the burden of the energy crisis?

According to Anindya Banerjee, the current energy crisis is affecting four main sectors of the economy. Government Oil Companies (OMCs), Government, Industrial Sector and common households. He explained that so far, the government has borne a part of this burden by reducing excise duty.

At the same time, oil companies are facing huge losses due to “under-recovery” i.e. selling petrol, diesel and LPG at subsidized rates. Banerjee said that energy prices for industrial users have already increased.

However, common consumers have been largely protected from these increases so far. Nevertheless, if crude oil prices remain high for a long time, it is sure to have an impact on the general public as well.

Why is this crisis different?

Anindya Banerjee believes that the current situation is different from the previous situations. Although there is no complete global shortage of oil and gas, supply routes are being disrupted. Tensions in West Asia involving the US, Iran and Israel have put enormous pressure on oil supply chains and shipping operations.

He further said that precisely because of this, it has become difficult to predict how long this crisis will continue. This may last just a month, or it may extend for several months. As a result, the government is exercising caution and avoiding taking any hasty decisions regarding fuel prices.

Increasing pressure on OMC

Government oil companies are currently purchasing crude oil at higher market rates, yet they are selling petrol, diesel and LPG at fixed prices only. Due to this, these companies are continuously facing heavy financial burden.

Experts believe that if the government allows the increase in prices, then the prices of petrol and diesel may initially increase by Rs 5 to 7 per liter. Apart from this, LPG cylinders and CNG can also be expensive.

A big challenge for the government

The biggest challenge before the government at this time is to control inflation and stop the economic burden on the common people. On one hand, the losses incurred by oil companies are continuously increasing. On the other hand, rising fuel prices may also increase the cost of transportation, agriculture and everyday items. As a result, both the market and the general public are keeping a close eye on the decisions taken by the government and oil companies in the coming days.