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Reasons Behind the Fuel Prices Rise and Fall

Date:22-06-2022 | By: Redlines Diesel Trading

The fluctuations in fuel prices are a major concern for everyone that adversely affects one's life. There are many reasons behind the fuel prices rise and fall. The prices of fuel have been acting like a roller coaster ride as they affect a series of factors including oil and gas prices, seasonal demand, commodities speculation, and the variation in the value of the dollar. A hike in fuel price in the world market affects the economical development of the country which influences the life of common people to meet the basic necessities such as food and public transport fares.

The retail outlets vary the pricing of fuels as per the changes in the international market and other factors such as exchange rate, tax structure, inland freight, and additional costs. The increase in oil price has been a great hike in the inflation rate reducing the economic growth of a nation. Diesel trading companies in Abu Dhabi serve high-quality fuel with the modern advancement in production and distribution methods at a considerable market rate.


Reasons Behind the Fuel Prices Rise and Fall

The prices at the pump have a cascading effect to lead a normal life as the demand steeply rises than the supply. The fuel suppliers in Dubai supply premium quality low sulfur automotive fuel with outstanding experience and expertise in the field. Let us take a deep dive to know the reasons behind the jump in fuel prices whether it is a fall or rise.

Crude Oil Price

The variations in the price of crude oil, the commodity of the international market, have a direct influence on the pricing of fuel. The variation in the demand and supply of crude oil may reflect the increase or decrease in fuel price. International crises or political issues have a considerable impact on the rise or fall of crude oil, thus influencing the rate of fuel price.

Price Charged to Dealers

 Oil Marketing Companies (OMCs) have a major role in determining the price of fuels as the crude oil is collected and distributed by them. The fixing of the price of fuel is determined by various factors such as freight charges, refining costs, and so on.

Central Excise Duty on Fuels

This Excise duty is the indirect tax levied by the Central Government on petrol and diesel. The Excise duty for fuel is constant and does not fluctuate with the variation in the fuel price or crude oil. Hence, the retail price of petrol and diesel is made up of central excise duty imposed by the Government.

Sales Tax or Value Added Tax (VAT)

The sales tax or Value Added Tax (VAT) on petroleum products is an important revenue source for both the Center and state governments. This is determined by various factors such as the excise duty charged by the center, the commission of the dealers, and so on.

Demand for fuel

The increase in demand for fuel results in a higher price and the decrease in demand for fuel results in a lower price. There is a considerable rise in the number of vehicles on the road in recent years. Hence, the demand rises with increased prices. The fuel such as petrol and diesel are extracted from the crude oil which gets refined from the international market. Hence, the supply of fuel may not get satisfactory, thus demand rises and there will be considerable hikes in the prices.

Valuation of US dollar

The price of the U.S. dollar is inversely proportional to the price of crude oil and there exists a strong inverse relationship between the two. Thus, it holds a significant role in the alteration of prices of petrol and diesel. When the US dollar is higher, there will be a considerable hike in the price of commodities which affects the negative influence on demand and vice versa. When the US dollar is weak, the oil price is higher as the United States has been a net importer of oil. 

Consumption Ratio of Refineries

The fuel is refined from the crude oil after a long refining process. If the provisions for the number of refineries are limited, it may affect the overall quantity of petrol or diesel available in the market. Hence, the supply of the fuel decreases resulting in a price hike in the fuel rate.

Commission for Dealers

The Oil Marketing Companies have a certain contract with fuel dealers and petrol pump dealers regarding the commission, profit, etc. Hence, commission for dealers plays a significant role in making up the price of petrol and diesel.

We are well aware of the reasons behind price variation in the fuel price which is the most hotly debated topic discussed everywhere. The skyrocketing fuel prices affect common people who face real difficulties in their daily lives. Hence, it's time to take an active role to control the situation as the price of petrol and diesel largely depends on the price of crude oil in the international market. 

If you are looking forward to the perfect delivery of high-quality fuel, get in contact with us at Redlines Diesel Trading, the leading diesel trading company in Dubai. We are reliable fuel suppliers in Dubai delivering top-quality fuel in association with well-trained workers, well-equipped machinery, and an efficient distribution system. We have well-qualified and certified managers and drivers with 24/7 customer support by carefully loading and unloading fuel products with great experience and expertise. Our dedicated team maintains a healthy and long-lasting relationship with our customers offering innovative fuel solutions for their transportation, industrial and other needs. 

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