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Petrol Diesel Pricing in India and Impact on Copper

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by - 6/23/2021 1687 Views

India being one of the world's largest consumers of Petrol and Diesel it is important that the Pricing Policy must safeguard the finances of general public who use it directly and indirectly on a day to day basis.

Author: C.G.Nadar
Editor: Jenisha
Research: C.G.Nadar
Visualization: Rakesh
Commodity: Crude Oil, Copper, Petrol, Diesel
Data: Crude Oil/Barrel 2005-2021, USD Vs INR 2005-2021, Copper, Petrol & Diesel Prices India
Technology: Python, Tensorflow, Keras, Scipy, Numpy, Pandas

Petrol and Diesel Prices play a vital role in the growth of an economy with a direct impact on the inflation. India being one of the world's largest consumers of petrol and diesel it is important that the pricing policy must safeguard the finances of general public who use it directly and indirectly on a day to day basis. This research is to explore the pricing policies, gap between petrol and diesel pricing and their effects in the past 15 years.

While the pricing of petrol is a complicated process which involves Crude prices, Transportation, Refining, USD VS INR exchange rates and other factors, we will try to include as much as major factors involved in the pricing of petrol and diesel. This study is conducted over a period of 15 years from 2005 to 2020. We correlate the petrol diesel prices with MCX Copper in linkage to COMEX Copper.

Read the Petrol and Diesel Data

Let us have a glance on the yearly average price of Petrol, Diesel and Crude/Barrel in USD from 2005 to 2021.

Yearly Average Price of Petrol, Diesel and Crude (Barrel/USD)  [historic-petrol-diesel-prices-india.png]

A Comparative Study on Diesel vs. Petrol Prices from 2005-2014 vs. 2014-2021

Let us plot the historic prices of petrol and diesel to analyze the pricing policy of petrol and diesel. As you see in the graph, diesel prices were way too low for the period of 2005-2014 compared to 2014-21. The lower or subsidized diesel policy in India encouraged industries to manufacture engines that run on diesel. Even though the maintenance cost and carbon emissions were high compared to petrol engines, the diesel engines were on higher demand with a premium pricing owing to the lower cost of diesel.

As you see in this graph after the Year 2014 the gap between petrol and diesel price narrowed and almost was equal in year 2020. This had disrupted industries such as agriculture, transportation, fishing and small and medium industries that operate on diesel engines. The pricing has indirectly affected common people of India as the cost of every service related to the consumption of diesel shot up not in proportionate to diesel price hike but much more than that. For example, tractor owners charge more than 20% on their service for a 10% hike in price while we all know that fuel cost maybe around 40-60% of the overall cost for these operators.

Average Petrol vs. Diesel Prices from 2005 to 2021 [historic-petrol-vs-diesel-prices-India]

Crude Oil Prices (US$/Barrel) vs. Petrol and Diesel Prices in India 2005-2021

The crucial pricing factor for any commodity originates from the raw material cost. The raw material for petrol and diesel is Crude oil which is priced in United States Dollar per barrel (159 liters or 42 gallons) which is mainly imported. Crude Oil prices are very sensitive to numerous factors, for example War, Climate Changes, Pandemic such as Corona etc. We can safely assume that Crude oil prices are highly fluctuating and the countries such as India who rely much on imports have to adjust the fuel prices accordingly. This graph displays the Crude oil prices, petrol and diesel prices.

The Observation of Petrol, Diesel Prices Compared to Crude Oil Prices (2005-21)

• Crude Oil has a Highest Avg. Price of USD 102.5/Barrel (2011)

• Crude Oil has a Lowest Avg. Price of USD 37.2/Barrel (2020)

• After 2014 the Avg. cost per Petrol/liter is Higher than the Crude Oil Barrel

• After 2014 the Avg. cost per Diesel/litter is Higher than the Crude Oil Barrel

We Analyzed the Key Factors which Caused the Spike in Oil Prices for the Year 2011

Civil War in Libya:

Crude Oil Prices escalated over USD 15 due to the Arab spring and the civil war in Libya as the market coped with the loss of 1.5 million barrels per day of exports from Libya. This sudden supply loss challenged the ability of the Organization of the Petroleum Exporting Countries (OPEC) producers to provide incremental supplies to a high demand market.

Rise in Demand Especially in the Fast Growing Chinese Economy:

Demand growth in emerging markets like China and India drove crude oil prices higher in 2011. The overall global demand for Oil rose by 1.2% or roughly one million barrels.

Transportation Issues:

Oil prices were severely impacted by transportation constraints out of the U.S. Midwest, the main market for WTI.

Why did Avg. Crude Price Fall to 37.24 in 2020?

Travel Restrictions Due to Covid 19

The worldwide demand for Crude Oil fell drastically as Countries closed businesses and restricted travel due to the COVID-19 pandemic. Internal lockdowns made it even worse for the price of Oil.

Oversupply of Oil

The oversupply of Oil led to collapse in oil prices forcing the Oil contract futures price to trade in the negative region. Storage was an issue for oil contracts as transportation almost ceased to exist during this period.

Saudi Arabia and Russia Price Wars

The oil price war between Russia and Saudi Arabia is another factor which affected the oil prices negatively.

 Crude Oil Prices High & Low in USD [historic-crude-prices-high-low]

Let us Analyze the Oil Price Data per Barrel in Indian Rupee Based on the Average Exchange of that Respective Year for Mean, Standard Deviation, Min, Max and 25, 50 & 75%.

  • The Mean or the Average of 17 year prices is INR 3747.62 per Barrel.
  • The Standard Deviation of Average Crude Oil Prices is 1131.76. The Standard Deviation denoted by sigma is a measure of the spread of numbers.
  • The Min Yearly Average Price per Barrel = INR 2147.73 (Year 2005).
  • The Max Yearly Average Price per Barrel = INR 5741.23 (Year 2013).
  • 25% Means 25% of the Prices are 2787.67 or Below.
  • 50% Means 50% of the Prices are 3462.23 or Below.
  • 75% Means 75% of the Prices are 4651.81 or Below.

                             [Min-max-std-crude-INR]

                            [Crude-INR-petrol-diesel-prices]

As you observe the bars for crude oil prices in INR/Barrel is disproportionate to the petrol and diesel bars. For better visualization and simplicity of calculations, we will scale down the INR per barrel to 30-100 range which is the approximate minimum max range of petrol and diesel prices. So the minimum value (2147) of average Crude price in INR per barrel will be equated to 30 and max price (5741) to 100.

The plot indicates that the ratio of Crude Barrel rates in INR to petrol diesel rates have drastically reversed after 2014

You can notice the blue bar (Scaled Crude barrel rates in INR) is significantly lower to the Petrol diesel rates than it was before 2014. In fact the 2008, 2010, 2011, 2012, 1013 & 2014 Crude rates in INR is much greater than the petrol prices while the 2015-21 period is much lower than the petrol prices. The year 2020 in spite of the corona pandemic saw a huge gap in the Crude oil and petrol pricing. The below data will provide an insight on the petrol diesel pricing policy.

Year 2007

Crude Oil/Barrel USD: $67.19 USD INR exchange Rate: 41.49 Crude Oil/Barrel INR: 2787.67 Petrol Price Liter: 43 Diesel Price Liter: 30.25

Year 2020

Crude Oil/Barrel USD: $37.24 USD INR exchange Rate: 74.1 Crude Oil/Barrel INR: 2759.57 Petrol Price Liter: 79.76 Diesel Price Liter: 77.88

While the cost per crude barrel in INR is less than that of 2007, the petrol rate is 79.76 which is 33.76 INR costlier than the 2007 rate of 43 INR/litter. This is a whopping 85.49% hike while the cost of crude in INR is less than the price of 2020.

The diesel rate is 77.78 which are 47.53 INR costlier than the 2007 rate of 30.25 INR/litter. This is a blizzard 257.75% hike while the cost of crude in INR is less than the price of 2020.

                                  [historic-petrol-diesel-prices-india-scaled]

                     [historic-petrol-diesel-prices-india-scaled-barchart]

The average pricing of Petrol in terms of percentage with the total average cost of crude oil per barrel in INR

2005-2014: 1.4

2014-2021: 2.02

The average pricing of Diesel in terms of percentage with the total average cost of crude oil per barrel in INR

2005-2014: 0.99

2014-2021: 1.76

Now let us calculate the cost of petrol based on prior 2014 pricing and plot it against the actual petrol rates from 2014. 

Category : General

Tags : Petrol, Diesel, Pricing In India, Impact On Copper


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About Jenisha Rajakumar

I'M a Research Analyst and Content Creator at RIM. Currently I'm researching on Copper Prices around the Globe and the impacts on Copper Scrap Prices with regard to COMEX, LME, SHFE and MCX. .... more info

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