Hike on petrol price and its impacts

The hike in price subsequently affects the livelihood of people along with an increase in public transportation cost, as transportation cost affects the price of all commodities, including daily consumable groceries and vegetables. To put it in simple words, “THE COST OF LIVING WILL BE HIGH.”

“Increasing Petrol Price' ’is the current hot issue to be discussed these days. The price of petrol has been increased 15 times in the past year (2020/2021) in Nepal. Now the price of petrol is NRs130 per liter. The average price of gasoline (petrol) around the world is 1.20$ per liter. However, there is a substantial difference in the price among countries. All the countries have access to the same petroleum prices on the international market. However, their decision to impose different taxes results in the disparity in the retail price around the world.

Fuel prices around the world are on a roller coaster ride. The present disaster in the world fuel market is the result of rising consumption especially in rapidly growing economies like China and India, and due to the failure to address oil market concerns by the Organization of the Petroleum Exporting Countries (OPEC).

The perception that supply is struggling to keep up with demand has also contributed to the rising trend in oil prices in the past few months. Compared with the fuel price globally, Nepalis are paying even more than those in some of the developed countries. Being a poor and developing country  Nepal is unable to meet the skyrocketing fuel prices.

Higher petrol and diesel prices tend to increase household expenditure, directly or indirectly. The value of essential commodities like food, medicine, etc. has been impacted by a rise in fuel price. The hike in price subsequently affects the livelihood of people along with an increase in public transportation cost, as transportation cost affects the price of all commodities, including daily consumable groceries and vegetables. To put it in simple words, “THE COST OF LIVING WILL BE HIGH.”

The price of petrol was hiked 10 times in six months --- from 16th of February, 2021 to 6th of July, 2021 taking the price from Rs 110 (Feb 16) to  Rs 130 (till date). The price of petrol and diesel in Nepal has surged by more than 20% in one year, according to the Nepal Oil Corporation (NOC). The government has been allowing NOC, the state-owned petroleum giant to adjust fuel prices almost every fortnight based on the international market trends. 

The rise in the price can be explained through the ‘DEMAND AND SUPPLY’ theory. Resumption of business and social activities after COVID-19 boosted across the world along with some hopes of future demand for crude oil. According to the Organization of the Petroleum Exporting Countries (OPEC), the average consumption in 2021 is 96.58 million barrels per day predicted by International Energy Agency (IEA)  which in 2020 was 90.63 million also predicted by IEA  that by 2020  the demand would surpass the pre-pandemic demand.

In order to meet the increasing price of petrol in Nepal, we need a huge investment in the power sector. We should be able to create a favorable atmosphere for investors. We should try our best to take advantage of the huge energy requirements of India, which is gradually emerging as a global power.