3 July, 2009 - Three days after the trade department announced a minimal drop in fuel price, the price of petrol has increased by around Nu 3.70 and diesel by about Nu 1.97.

The new price will come into effect from today.

Petrol will now cost Nu 38.25 a litre and diesel Nu 30,97 in Thimphu. On July 1, price of petrol and diesel decreased by 28 cheltrums and 21 cheltrums respectively.

However, LPG and kerosene prices will remain the same.

The price increase comes on the heels of the Indian government announcing an increase of Rs 4 per liter of petrol and Rs 2 per liter of diesel on Wednesday. This follows a global increase in the price of crude oil, currently at 70 US dollars a barrel and already high subsidies on oil prices hurting oil companies and government revenue.

Officiating Trade Director Dophu Tshering said, “Our oil prices is linked to the Indian system since we take our supplies from them and any change there will have to be immediately adjusted here.”

However, for Bhutan the hike was slightly lesser because of Bhutan’s close location to the oil refineries of Assam and also of West Bengal’s taxation system, according to the Director.

Vice Chairman of Tashi Group of Companies Wangchuk said that the company’s oil depots would immediately adjust to the new prices issued by the government.

This sharp increase now comes after three decreases in December 2008, January 2009 and this Wednesday.

Experts say that the two quick and sharp falls in December 2008 and January 2009 were more shaper than the fall in global crude price, which was influenced by the Indian general elections of 2009. This, said a Bhutanese analyst, was a corrective measure for that gap.

Before that, due to global crude prices fuel prices were raised in February 2008 and June 2008 to record levels.

A recent Indian finance ministry survey has recommended deregulating the control of oil prices since subsidized oil contributed to higher demands.