International prices drive local fuel costs, NOC says

KATHMANDU: Nepal Oil Corporation (NOC) has said that international prices determine the retail prices of petroleum products in local markets, and that recent increases reflect global market movements. 

On April 16, the NOC raised the prices of diesel and kerosene by Rs 30 per litre and aviation turbine fuel (ATF) by Rs 5 per litre, but said it is still incurring a loss on diesel sales.

NOC Spokesperson Manoj Thakur said the prices of refined oil products are always higher than those of crude oil because Nepal does not have its own refinery and must import refined fuels directly rather than crude oil. “While analysing the market prices of petroleum products in Nepal, they should not be compared with crude oil prices, but rather with the prices of refined fuels,” he said.

The NOC purchases petroleum products from the Indian Oil Corporation (IOC), and prices are adjusted automatically every 15 days based on the rates it pays to the IOC. According to data cited by the NOC, on April 16, the price of crude oil per barrel was $99.6, while petrol was traded at $139.3 and diesel at $228.1.

Under normal circumstances, there is typically a difference of around $10 between crude oil and petrol, and around $20 between crude oil and diesel. Recently, however, this gap has widened to $144 and $216, respectively, due to international adversity triggered by the Gulf tension, placing countries that import refined fuel under increased pressure from rising prices.

The NOC said customs duties, taxes, transportation, insurance, storage and service fees also play a role in determining the final retail price of fuel. 

For the first cluster, the price of diesel and petrol is Rs 234.50 per litre; Rs 236 for the second cluster; and Rs 237 for the third cluster.

Even after the price hike, the NOC is still incurring a loss of Rs 99.96 per litre on diesel. Due to the gradual rise in petroleum product prices in the international market, the NOC is likely to incur a loss of around Rs 5.75 billion in the next 15 days.