Here's why rising diesel prices should be a bigger worry
On a year-to-date basis, the price of Brent crude has increased to $66.13 per barrel from $51.80 per barrel on December 31 last year.
Diesel prices have seen a sharp price movement in the past few days. The price of diesel has always been lower compared to petrol because of the different tax structure by both the Centre and state governments.
Fuel prices have a direct impact on the consumer, but do you know that diesel prices can burn an equally bigger hole in your wallet.
On a year-to-date basis, the price of Brent crude has increased to $66.13 per barrel from $51.80 per barrel on December 31, 2020. The price of WTI crude oil surged up to $62.50 per barrel, hinting at the rise in crude prices in the upcoming months. As of today, the cost of diesel is Rs 81.32/litre and petrol at Rs 90.93/litre in New Delhi. Crude prices are expected to edge higher because of production cuts from the OPEC+ countries. Also, owing to the Coronavirus pandemic, the central government is not ready to reduce taxes.
While we have been worried about the spike in petrol prices because of its immediate effect on our pockets, it is diesel that costs us the most.
Transport Sector
According to data provided by the Petroleum Planning and Analysis Cell (PPAC), transport and agriculture are the top diesel consuming sectors in India. Most public transport and freight vehicles are diesel based. A hike in the price of diesel gets eventually passed on to the end consumers. Hence, a hike in diesel prices will have an impact on the cost of television sets, refrigerators, vegetables, etc.
Inflation
Climbing diesel prices translates to extra cost on almost every product as the transportation cost gets added on to the final cost. Pricier the product, less the demand. Eventually, inflation in the transport segment rises which has a domino effect on the consumers.
Agriculture
Agriculture sector consumes 13% of the total diesel consumption, shows PPAC data. As diesel prices rise, farmers pay more for their inputs. When the cost of inputs increases at a higher rate than the farmer’s income, the profits of farmers get dented.
Power, railways and telecom are other sectors that are dependent on diesel.