Increase Petrol Price
We're not linked with the world market in case of Crude Oil, but Government makes it show that it's interconnected. If the prices of Crude are with International Standard, the prices will come up when market comes up or vice versa. Our prices come up when the International Prices goes down. This is because there's a jet-lag for what is happening in the economy. For Ex:- If the crude prices had been increased from US$ 90 to US$ 100 per barrel. That time our petrol prices or diesel prices will not come up. But we will be purchasing crude from Iran, Iraq, Saudi Arabia, etc.
Crude will be taking almost 1 month to reach the shores and it's being processed. Markets will go up or come down. But we bought at the price of US$ 100/Barrel. But once market goes up, it comes down too fast as people started buying it or started betting on it. When betting takes place, the equilibrium between Demand and Supply mismatches, due to just betting but not buying it in the commodity market. So actually the price started decelerating. It will come to the position where it will create a new equilibrium. Later the Crude which has been changed to Petrol and Diesel comes to the market. At that time we're at the new equilibrium. But the Oil Companies already bought the price at US$ 100/Barrel and now the new equilibrium is US$ 80/Barrel. Here the Oil Companies is having a loss of US$ 20/Barrel now.
Now Government can't increase the price, but Oil Companies can't do business with loss. Government started to issue Oil Bond to the oil companies. But later Government will be replacing it with cash. This time market goes down more. Government once more issued oil bonds, thus created a gap in the coffers. But they want to keep the Oil Company moving. At last Government has no choice, just to raise money from the market, by increasing the price of petrol and diesel, thus making money to cover the Oil Bonds. But due to time gap all this things happen. This happens due to wrong forecasting by the Government.
CAT 2013; Yahoo News
Crude will be taking almost 1 month to reach the shores and it's being processed. Markets will go up or come down. But we bought at the price of US$ 100/Barrel. But once market goes up, it comes down too fast as people started buying it or started betting on it. When betting takes place, the equilibrium between Demand and Supply mismatches, due to just betting but not buying it in the commodity market. So actually the price started decelerating. It will come to the position where it will create a new equilibrium. Later the Crude which has been changed to Petrol and Diesel comes to the market. At that time we're at the new equilibrium. But the Oil Companies already bought the price at US$ 100/Barrel and now the new equilibrium is US$ 80/Barrel. Here the Oil Companies is having a loss of US$ 20/Barrel now.
Now Government can't increase the price, but Oil Companies can't do business with loss. Government started to issue Oil Bond to the oil companies. But later Government will be replacing it with cash. This time market goes down more. Government once more issued oil bonds, thus created a gap in the coffers. But they want to keep the Oil Company moving. At last Government has no choice, just to raise money from the market, by increasing the price of petrol and diesel, thus making money to cover the Oil Bonds. But due to time gap all this things happen. This happens due to wrong forecasting by the Government.
CAT 2013; Yahoo News
