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THE LIQUID GOLD:

PETROL
Objectives:
Introduction
Analysis of petrol prices
Price Determinants
Demand estimates
Elasticity effect on petrol

Introduction: Petroleum
Industry
India is now the fourth largest consumer of
crude oil & petrol in the world.
To fulfill its need, India imports 80% of the
crude oil which is further processed into
petroleum products.
99.6% of petrol is consumed in the
transport sector.

Type

% consumption

Two Wheelers

61.42

Three wheelers

2.34

Four Wheelers

34.33

Price Analysis:
Brand

( company)

Rate (in Rs.)

Bharat petroleum

62.13

Indian oil

62.15

Shell

62.15

Hp

62.21

when we analyzed the petroleum industry we reached to


following conclusions:
The price difference among the various brands was minute.
The number of buyers were huge i.e. almost 80% of total
population
The number of sellers were few.

IT IS OLIGOPOLY MARKET

Price Determinants:
Cost of Crude oil
Tax burden
Increased demand
Mismatch of supply and demand
Dealers commission

As India imports 80% of its crude oil, therefore the

prices of petrol heavily depend on international


crude price.
The crude price depends on demand and supply of
crude in the whole world.

Tax Burden:
A number of taxes are levied in India on petrol

such as:Tax Type

Amount or
Percentage

Excise Duty

14.35 rs/litre

Custom Duty

2.5 % per litre

Sales Vat

15-23 % per litre

For eg: In Surat, price of petrol is Rs62 & Vat is 23%,


therefore taxes contribute almost 50% to the price we pay.

Demand :

Till 2025, the petrol demand in the nation is expected to


increase by 165% as per the future growth scenarios.

Supply:
To meet its requirements India imports 80% of the total demand from
countries like Iran, Iraq, Saudi Arabia, and Syria, etc.

Whereas In India the major petroleum


refineries are as follows:
Name of Refinery

Refining capacity
(in million tonnes)

Indian oil corporation Baurauni

3.50

Bharat Petroleum corp.Bombay

5.25

Assam Oil Company- Digboi

0.50

Vishkhapatnam

1.50

Cochin Refineries- cochin

3.30

Jamnagar Refinery (RIL)

33.0

Guru Gobind singh RefineryBhatinda

9.0

Elasticity:

Price Elasticity:
Demand for petrol is quite inelastic.
For E.g.: If you have a car, there are not many alternatives to
buying petrol. This is why the increased price of petrol has
failed to reduce demand for petrol significantly. (there is an
estimated PED of petrol of -0.1 in the short term)

Income Elasticity:
When the income if individual increases, the
individual tend to buy more vehicles as a result the
demand for the petrol increases indirectly.

Hence we can say Income elasticity is positive for


petrol.

Thank
you..!