Wednesday, June 4, 2008

Effects of Oil price hike

The government has hiked petrol price by Rs. 5, diesel price by Rs. 3 and gas cylinder (14.2 Kg) price by Rs. 50 on the wake of global crude oil price increase while the price of kerosene remains unchanged. The move is also accompanied by several reductions in customs and excise duties related to oil.

Though the rise in oil prices will be a relief for oil marketing companies like BPCL, HPCL etc, their losses will not covered completely by the rise. All the measures (price hikes and duty cuts) will reduce their loss by Rs. 21,000 Crore (1 Crore = 10 Million)after a cost of Rs. 22,600 Crore to the government due to the reduction in income from duties. Still, there will be a gap of Rs. 29,000 Crore, which indicates that the rise is not enough and there could be another oil price increase in future.

The rise in oil prices will definitely add salt to the wounds already created by inflation surge. Since oil prices are directly or indirectly linked to food and other commodities used by the common populace, inflation is most likely to increase in the days to come. Strong correlation that the oil has with inflation!

So, will it lead to a decrease in the usage of petrol? Quite possible, as people who own vehicles would try not to use it more and would prefer alternative methods like car pooling, public transport etc. There is also a chance that the cost of public transport (transport buses, cabs, ricks etc.) may increase.

In all possibility, I feel, the middle and upper classes will manage to escape from the pinch, but it’s the lower class that is going to suffer, as usual!!



The price at the pump is to high.

Saanvi Nair said...

Overall the rates of stocks affect each other. With gold other metals get affected. Similarly many factors affect the oil prices also. When you study the MCX TIPS ,stock tips, equity tips you will get to know the market trend well.