Reality check on oil price hike

  Yesterday, Diesel and LPG's prices were hiked again. This encouraged me to do an analysis for self-satisfaction on whether these price hikes were necessary (rates have been increased 10 times in last one year) or just result of bad administration on PSUs.

Now after talking to some friends who are working in oil industries and internet search.

a) I found that following is processing cost for oil companies:



  •       74% - Cost of the crude oil
  •       11% - Taxes Please note: This has been reduced yesterday significantly! (Ref:Link1 and Link2)
  •       10% - Refining costs
  •       5% - Distribution and marketing (Ref: Link3)


b) Current crude oil cost: Around USD 100/barrel (Ref: Link4)

          So, total cost of processing is: USD 135/barrel (from (a) and (b))

          1 oil barrel= 42 gallon and hence 159 litres (approx)

          Cost per litre of processed oil: USD 0.85= INR 38.2

c) Now, whether processed oil is petrol/diesel/keronses that depends on demand and can vary, Assume it to be:


  • 60 percent petrol
  • 30 percent diesel
  • 10 percent kerosene


d) Current prices/selling prices (in Delhi):


  •       Petrol: 63.37
  •       Diesel: 41.12 (Ref: Link5)
  •       Kerosene: 12.32 (Ref: Link6)


Cost to "aam aadmi"= Selling price= 0.6x63.37 + 0.3x41.12 + 0.1x12.32= 51.59 (from (c) and (d))

Profit/litre on processed oil to companies: 51.59-38.2= INR 13.39!

You kidding me! A profit of 13.39/litre! after hidden taxes like VAT and all it will be still INR 10.00!

If government still shows that companies are in loss and this price rise was only option left, stop fooling us! Improve functionality of PSUs like BPCL, IOCL etc. and prices will come down automatically.

Comments

  1. AnonymousJune 27, 2011 at 2:24 AM

    Just Caluculate what is the cost of whisky/hard drinks to the comapnies....as they are also getting expensive these days...
    Rishi

    ReplyDelete
  2. performance bondsSeptember 24, 2011 at 9:22 PM

    You can't really tell when will this global crisis would end. I'm just hoping that we will be able to stand each bright economy we once had.

    ReplyDelete

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