Indian Petrol Prices vs Demand

On 5th May 2021, Indian government hiked excise duty on petrol by ₹10 and on diesel by ₹13. Many of you argued that hiking petrol prices would be senseless under the current situation as this will further reduce the demand and effectively taxes. But when I was searching past literature regarding the same, look what I found!!

Price elasticity of demand for a product is defined as a percentage change in demand when you increase or decrease the price of a product by 1% (Economics 101). If this value is less than 1% (absolute) then that means your demand is inelastic, relatively insensitive towards price changes.

The literature says that Indian crude oil has elasticity of -0.43%, that means 1% increase in global oil prices would reduce import by 0.43%. Also, various studies have found that elasticity of diesel price stood at -0.5% and that of petrol is -1.1%. This also indicates a higher dependence on oil rather than alternative renewable resources in India.

References - [1], [2]

Will India see drop in petrol and diesel prices? – WTI oil crash and its impacts

Ever wondered, who decides the petrol prices in India?
 

My next article will certainly be going to answer this question in simplest possible way. It will also talk about WTI crash happened on 20th April and its effects on India petrol prices. Do read, like it and share it. If you have any questions/opinions about the topic, please feel free to share them in the comment section.

Click here - Impact of WTI oil crash on Indian petrol prices