Tshering Dorji

After four consecutive hikes in fuel price this year, the prices of petrol and diesel was slashed by Nu 0.06 and Nu 0.09 respectively. The price cut came into effective since last midnight.

The price of petrol in Thimphu is now Nu 62.73 per litre, down from Nu 62.79. Similarly price of diesel in the capital is now Nu 61.79 a litre, decrease from Nu 61.88.

Sarpang sells the cheapest fuel at Nu 56.37 per litre of petrol and Nu 56.71 a liter of diesel. This is followed by Samdrupjongkhar, with Nu 56.43 a litre of petrol and Nu 56.80 a liter of diesel.

The drop, according to Indian media is due decline in global fuel prices. The change in the price of crude oil in the international market directly influences the price of crude oil. This is one of the most important factors responsible for price fluctuation. Political unrest in the oil producing countries also affect fuel price.

The country’s fuel price is also dependent on the Indian economy since Bhutan directly imports petroleum products from India.

The number of people who own private vehicles has multiplied in the recent past, which has contributed to the increase in demand for fuel, both in India and Bhutan.

Despite the downward revision in fuel price in 2018, the country imported Nu 7.9B worth of diesel and Nu 2.3B worth of petrol, according to trade statistics.

Fuel prices are also influenced by government policies and taxes. As and when the government of India raises tax rates on crude oil or the refineries in India, fuel prices in Bhutan increases. In 2018, when the global fuel price experienced a series of price cuts, Indian government, at one point, revised the excise duty barring the benefit to be passed on to the consumers. This has affected consumers in Bhutan while the government claimed refund.

The green tax on fuel, which the government introduced in 2014 is also affecting consumers.

The exchange rate, particularly Indian Rupee to USD, is also one of the major factors, which influence the price of fuel in both India and Bhutan. Indian oil companies pay for oil imported from other countries in USD, but their expenses are driven in INR. So, when the price of the crude oil is in the fall but the rupee is also weak against the dollar, it will reduce the gains to the oil refiners. On the other hand, when the rupee strengthens against the dollar and the price of the crude oil fall, oil companies tend to gain.

Logistics is another factors in pricing retail fuel. Petrol and diesel transported to longer distances to cities or regions farther from depots will be priced higher than the places nearer to the oil companies storage area.

However there are also other small factors such as humidity and evaporation rate the influence the fuel pricing. This is why fuel price in Mongar is cheaper than Thimphu and Samtse.