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Fuel price likely to drop again

Petroleum: Fuel prices in the country is  likely to drop again, registering ninth straight cut since August last year.

Figures from trade department reveals that price of petrol were revised 18 times last year reaching as high as Nu 73 a litre in July. Since then it has dropped nine times reaching almost Nu 62 a litre.

In 2014, diesel price was revised 17 times. From about Nu 54 a litre in January, it reached to almost Nu 62 in October. Then it has dropped six times in three months reaching to around Nu 53 by yearend.

This was on the back of global crude oil prices hitting a six -year low. Oil companies in India are expecting the prices of petrol and diesel to drop by Rs 2 each. Trade officials are optimistic that the price would drop by midnight today.

While the prices of international crude oil fell below USD 45 per barrel, latest media reports indicate that Organization of the Petroleum Exporting Countries (OPEC) doesn’t plan to cut production despite the plunge in demand.

OPEC is an organisation comprised of oil producing countries that coordinate and unify the petroleum policies of its member countries and ensure the stabilisation of oil markets.

After the last price cut on December 16, the country could have enjoyed another cut by about Nu 2 on new-year.  However, as the price fell in India, the Indian government revised the excise duty on fuel stabilising the retail price in India and in Bhutan too.

Records from National statistical Bureau (NSB) reveal that oil price inflated by five percent between August 2013 and August 2014. However, as fuel prices dropped deflationary trend was recorded from 2.6 percent in September, 1.8 percent in October and 0.3 percent in November.

The overall inflation in the country declined to its lowest 6.6 percent in November from 8.7 percent in August.

Officials from NSB attributed the decrease in inflation rate to the decrease in global oil price since it was one of the major factors in deriving the inflation rate. A drop in fuel price means decrease in prices of all the commodities because transportation becomes cheaper.

Thus, inflation on food items fell from 11 percent in July to 6 percent in November. Similarly in nonfood group infaltion dropped from 8 percent in August to 7 percent in November.

An economist said price inelastic goods like fuel, where there are no substitutes, would impact inflation since demand may not fall irrespective of increase or decrease in price.

Whereas demand for price elastic goods, which can be substituted by other cheaper goods, may fall with price increase and does not contribute to inflation much.

Meanwhile, those following the global oil price closely said in India the jet fuel has plunged by 12 percent and now the aviation sector are competing to offer low travel fare and like wise transportation cost on both passenger and cargo vehicles are dropping.

However, he said despite nine straight drops in petrol price since last five months transportation fare has shown no signs of going down.

By Tshering Dorji 

 

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