The magnitude of the twin deficits of current account deficit and fiscal deficit over time results in depreciation or appreciation of the rupee. Since the crude prices are marked against the dollar and when the rupee/dollar rate fluctuates, the import price of crude oil is higher.
For simplistic reasons, I have multiplied the crude oil price on a given day against the forex rate for that day. I have not considered the indian basket price as well. Just for analysis, I present the complete graph of petrol, diesel (marked on the left y axis in Rs.) and the product of crude and exchange rate (barrel price in Rs. on the right y axis) for the last 10+ years. The following chart (click for a larger display) is a very good illustration of how the fuel price has been managed by the government of the day as well as the oil companies.
A few things stand out:
For simplistic reasons, I have multiplied the crude oil price on a given day against the forex rate for that day. I have not considered the indian basket price as well. Just for analysis, I present the complete graph of petrol, diesel (marked on the left y axis in Rs.) and the product of crude and exchange rate (barrel price in Rs. on the right y axis) for the last 10+ years. The following chart (click for a larger display) is a very good illustration of how the fuel price has been managed by the government of the day as well as the oil companies.
A few things stand out:
- Ratio of Petrol/Crude rise to Diesel/Crude rise is a big concern (That is the subsidy given)
- The Ratio of crude rise to Petrol rise is more than 1 (Were the oil companies making lot of money in the 2002-2011 timeframe?)
