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Fuel and prices

With the latest price cut, petrol and diesel today are at their cheapest for many years now. The price of petrol, which touched Nu 73 a litre in July 2013, has dropped by a whopping Nu 16 a litre. Diesel prices at one time reached that of petrol in 2013.  It is cheaper by Nu 14 now.

The drastic drop is because of the fall in crude oil price.  Experts are analysing the impact of the sudden drop in fuel prices on the global economy. Some say it is not good in the long run.  But, as of today, benefits of the sudden slump in fuel price are being felt as it trickles down to individuals.  In neighbouring India, airlines are competing with airfare price cuts, making travel by air cheaper.  Jet fuel, it is reported, is cheaper than diesel.

Experts predict that the crude oil price will not rise in the near future, at least not to the 2013 level, when it crossed USD 100 a barrel. In other words, transportation would be cheaper.  Will the fall in the price of fuel benefit individual Bhutanese?

It actually should, as the cost of transporting goods should go down too.  As a landlocked country, almost everything imported is transported in trucks.  The price of diesel directly influences the cost of transportation.  Truckers pass the cost on to shopkeepers, and shopkeepers in turn to consumers in the cost of goods.

Our transporters are quick to increase the cost of transportation, when there is a surge in fuel price.  The impact is immediate, sometimes overnight.  It is same with taxis and public transport.

The government does not regulate cost of transportation, with the exception of public transport like buses.  It is left to the market forces, especially the cost of fuel.  Yesterday’s drop in fuel rice is the 10th since August last year. Has the cost of goods gone down?  Not really.  The expectation is it will, and it should.

The government is also at a loss, when cost of transportation increase. A huge portion of our development budget is spent on transporting materials.  Therefore, a surge in fuel price pinches the government’s purse, and our ongoing mega projects. It escalates the cost of development activities.

While we do not hear much complaint, it is worth checking. If transportation cost has not changed with fuel price, it may demand intervention. The increase is automatic, but not the drop.

We should not forget that cost of materials in building infrastructure impacts the construction industry directly, and also has broader impact on the economy. If price of, for instance, stone or sand, doesn’t change because transportation cost has not, house rents will not drop.

It is not often that the price of fuel drops to today’s level. Everybody should reap the benefit, even if it be for a short-term.

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2 comments

  1. @ awakening It is natural that they will be quite. Even if you are one of them , I am sure you will not complain of dropped fuel price instead you will siliently pray that the trend continue. You cannot blame them . If you are really concerned and feel cheated then you should catch hold of the trade departments throat. They are once who are paid through our tax money and suppose to control such practices but weren’t proactive so far. So awakening awake them to perform their duty !

  2. If there is increases in oil price ,,,, tx-drivers and shop keepers … etc make huge issue about price ..which gives them one big reason to increase.. now when oil price has come down why they are quite..

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