Black Gold (i.e. Oil) 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 (last month price), 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 around 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, diesel costing about Rs 37 a litre, the actual cost can be taken as Rs 14 per litre as the companies are making a profit of almost Rs 4 a litre. I am wondering why these oil majors (like Indian Oil Company, Hindustan Petroleum Corporation Ltd., and Bharat Petroleum Corporation Ltd.) keep crying about making losses… I am sure the Government should sit on their Boards and scrutinize each & every line of their accounts (as it is doing in Satyam scam case)!