A gas station attendant pumps fuel into a customer's car at a gas station in Shanghai, China November 17, 2017. REUTERS/Aly Song/Files

With petrol prices hitting a new record of Rs. 82.03 in Delhi and Rs.87.50 in Mumbai. And everyone is in a total crises.

As India don’t have their own crude oil we import crude oil from Iran, Iraq, Saudi Arabia, Venezuela, Nigeria and UAE.

Through this we see that there is a high demand in petroleum the question still remains why is there a problem in the supply?

To answer this is, here’s a simple explanation. Though it may not be as simple as it sounds.
As West Asia and Venezuela are undergoing a diplomatically and political turmoil this is proving to be a cause in the supply problems of crude oil.

Another factor responsible for the lack of supply of petroleum would be the US- Iran sanction.

The United States has imposed sanctions against Iran and due to this Iran has locked supply. President Trump has threatened that “Anyone who is doing business with Iran will not be doing business with us “ and to this India has complied.

But this compliance with comes at a price. Because India has complied to the US Sanction, deals like India-Iran gas pipelines have been deferred.




This move by India won’t affect USA because they have Shale oil but this definitely affects the people of India.

Another factor responsible for the problems in supply of crude oil is the OPEC.
OPEC is the Organisation of the Petroleum Exporting Countries that is completely dominated by the Arabs.

This was done to reduce production and increase revenue. This sent the prices of fuel soaring.

And because our demand for fuel is inelastic OPEC charges us more.
Now, you must be asking what does inelastic demand mean?

Well here’s your answer, when crude prices in international market increase or decrease our demand will remain the same. We are still going to buy 80% of our fuel from abroad.

OPEC take advantage of this and puts the Asian Premium tax on this.
OPEC has a complete monopoly on the pricing of fuel, and if we go to negotiate the prices,well it wouldn’t even matter to them.

More the demand in fuel higher the price. No matter what happens to the global price we as a country or demand we will always be paying more.
To top it off the rupee is breaching Rs.74, though this is a whole other situation.




Other major factors responsible for the rise in fuel is the tax we pay. More than half the price we pay for fuel is the tax. But centre and state earn revenue from this and later blame each other for it.
So if international crude oil increases India will also increase its prices . But if prices are decreased globally instead of doing the same the prices are increased in India and the justification is given that the revenue earned will be used for fiscal deficits.

The only way out is to make our demands elastic. We should use electric vehicles, cycles, car pooling, use public modes of transportation and by saying a big no to driving alone.



Also Read : Why Is the Indian Rupee Losing Its Value ?

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