Understanding the Complete Cost of Fuel: A Comprehensive Guide
Fuel costs are not just about the price you pay at the pump. They encompass a complex web of factors, including environmental impact, geopolitical tensions, variable pricing, and local taxation. In this article, we will explore the complete cost of fuel, starting from crude oil importation to the final price at the filling station.
Global Fuel Pricing Variability
Price fluctuations in fuel are not isolated but influenced by numerous global factors. For instance, the price per gallon in one country can be significantly different from another. In some regions, fuel costs can vary widely based on geopolitical events, taxes, and market forces. The cost per gallon in India might be different from the cost in the United States or South Carolina, where it could vary from $2.23 to $1.99 respectively, for unleaded 87 octane gas.
The Cost of Crude Oil Importation
In India, the import rate of crude oil is approximately 80 dollars per barrel. One barrel of crude oil contains 159 liters, and the international market price for 1 barrel is 88 dollars, equating to about 5900 Rs.
Crude oil is first imported in barrels and then processed in Indian refineries. During this process, the crude oil is refined into petrol and diesel. An additional processing charge of 2.52 Rs per liter is added. This means the cost per liter of crude oil before processing is:
5900 Rs / 159 liters 37.15 Rs per liter
After refining, the cost becomes:
37.15 2.52 39.67 Rs per liter for the petro products.
Government Levies and Fuel Prices
The Indian government levies several taxes on petrol and diesel. Excise duty on petrol is 19.48 Rs per liter, and on diesel, it is 15.33 Rs per liter. Additionally, state VAT on petrol and diesel ranges from 20 to 39 Rs per liter. These taxes collectively add to the final price at the pump.
The processed fuel is then distributed by dealers who add their margin to the price. In a particular city, the final retail price of petrol is approximately 76.65 Rs per liter. This final price includes all the taxes and levies mentioned above, contributing to the development of the country and GDP growth.
Note: The fuel price is a sensitive issue, and while it is important to understand the cost structure, making it a large issue can create unnecessary tension. Fuel prices are governed by market forces and government policies, and while they should be understood, they also need to be accepted as part of the larger economic context.
Conclusion: The cost of fuel starts from the price of crude oil, which is then refined, add processing charges, taxes, levies, and dealer margins. This multi-step process results in the final price at the pump. Understanding this process helps in comprehending the broader economic impact of fuel costs.