Believe it or not: Oil cheaper than packaged water

At $38/Barrel, Petrol Rs 11/Ltr

Sanjay Dutta | TNN

New Delhi: Black Gold has lost its sheen, and how! Today, the cost of a litre of petrol or diesel for Indian oil majors is less than the price of a bottle of packaged water.
    Back-of-the-envelope calculations show that a litre of petrol costs about Rs 11 and diesel about Rs 14, excluding transportation and sundry other charges. By contrast, a
one-litre bottle of water costs between Rs 12-15.
    Here's how the arithmetic goes. A barrel of crude oil contains about 190 litres. At $38 a barrel, the current price in the international market, each litre of crude works out to Rs 10, taking the exchange rate at Rs 50 to a dollar. On an average, approximately 28-29 litres of petrol and 85 litres of diesel are refined from each barrel of crude. Admittedly, this figure can vary according to the type of crude being processed and the technology deployed in a refinery. So, how much would the price of a litre of motor fuel be after incurring the refining cost, if there were no other charges?
    The calculation is so mindboggling that sometimes even executives of oil marketing companies get confused by the myriad central and state taxes—levied at incremental rates—and the complex charges such as a 'freight equalisation levy' and dealer margins.
Such levies taken together constitute 45-55% of the sale price of petrol or diesel.
    So, if petrol costs a little under Rs 50 a litre at Mumbai pumps, taxes and levies make up about Rs 26 and another Rs 13 constitutes the oil-marketing firm's profit. That leaves a basic cost of about Rs 11 per litre. Similarly, at about Rs 37 a litre—the price of diesel—the actual cost can be taken as Rs 14 as the companies are making a profit of almost Rs 4 a litre. A WIN-WIN MOVE? Government may rejig petro-tax regime
New Delhi: The basic cost of petrol or diesel is much less than what the oil-marketing companies charge as nearly 55% of the price consist of the various Central and state levies.
    These calculations are admittedly simplistic and do not take into account other products such as kerosene, jet fuel, cooking gas, naphtha, etc, that are produced along with petrol and diesel and have a bearing on the final cost of each product. However, there won't be a big difference between these figures and the figures worked out by the industry.
    With crude projected to slide further in the coming days as the global slowdown gets a firmer grip on industry and pushes demand further down, the obvious question is: When will our pump prices go down further?
    TOI has repeatedly said this will happen just before the elections are announced, possibly around February. In the meantime, the government is looking to rejig the petro-tax regime to make way for lower prices without hurting oilmarketing companies that have accumulated huge losses during the extended run of high crude prices.