A sharp surge in global crude oil prices has triggered a massive hike in aviation turbine fuel (ATF) and commercial LPG rates in India, raising concerns over rising travel and business costs.
State-run oil marketing firms nearly quadrupled the price of aviation turbine fuel (ATF) for April due to high worldwide crude prices, which significantly increased airline costs.
ATF Prices Witness Massive Surge in April
With effect from April 1st, the price of ATF for domestic airlines in the nation’s capital has increased by 114% from ā¹96,638.14 in March to ā¹207,341.22 per kilolitre.
āļø ATF Price Highlights
- Delhi ATF Price: ā¹207,341.22/kL
- Previous Price: ā¹96,638.14/kL
- Increase: 114%
- Global Trigger: Crude oil surge
- Effective Date: April 1
- Impact: Airline cost spike
Global Conflict Driving Fuel Costs
The price hike coincides with a spike in global petroleum prices since the US, Israel, and Iran war started on February 28 and Iran’s subsequent blockade of the Strait of Hormuz, a crucial choke point for around 20% of the world’s oil commerce.
Just as peak summer travel is starting, the sharp increase in ATF, which makes up 35ā45% of an airline’s operational costs, might put pressure on margins and drive up ticket prices.
City-Wise ATF Price Increase
According to information on Indian Oil Corp’s website, prices in Kolkata, Mumbai, and Chennai have increased from ā¹99,587.14, ā¹90,451.87, and ā¹1,00,280.49 per kilolitre to ā¹205,955.33, ā¹194,968.67, and ā¹214,597.66 per kilolitre.
Similarly, starting on Wednesday, the cost of jet fuel for domestic planes operating internationally in Delhi is $1,690.81 per kilolitre, up from $816.91 per kilolitre in March.
š„ LPG Price Impact
- Delhi Price: ā¹2,078.50 (19kg)
- Increase: ā¹195.5
- Usage: Hotels & restaurants
- Effect: Rising inflation risk
- Frequency: 2nd hike in a month
- Trend: Upward pressure
Commercial LPG Prices Also Rise
The state-run OMCs typically update ATF prices at the beginning of each month. Since the beginning of the war, Indian OMCs had not changed ATF prices before.
Brent’s May contract on the Intercontinental Exchange was trading at $105.79 at 7:40 AM, up 1.73% from its previous close. West Texas Intermediate’s May contract on the NYMEX increased 1.52% to $102.92 a barrel.
With effect from Wednesday, commercial cooking gas rates have also increased by almost ā¹200, which is the second increase in commercial LPG in a month.
Since the latest review on March 7, the price of a 19-kg LPG cylinder in Delhi has increased by ā¹195.5 to ā¹2,078.50. A 19-kg commercial LPG cylinder costs ā¹2,208, ā¹2,031, and ā¹2,246 in Kolkata, Mumbai, and Chennai, compared to ā¹1,990, ā¹1,835, and ā¹2,043, respectively.
Impact on Businesses and Consumers
Restaurants, lodging facilities, and other enterprises utilize commercial LPG, and the increase could lead to inflation. In a similar vein, increased airfares are anticipated as a result of the spike in jet fuel prices.
The government has previously restricted supplies for commercial clients and given priority to domestic families due to the strong reliance of LPG supplies on imports from West Asia.
Supply Challenges and Government Measures
Currently, supply to commercial consumers account for almost 70% of average usage. It remained at 10% at the beginning of last month. However, the allotment has been progressively raised due to worries about supply limitations for companies.
Additionally, the government has encouraged homes, lodging facilities, and businesses to switch to piped natural gas, where feedstock availability is still more convenient.
India imports between 60 and 65 percent of the 33.2 million tonnes of LPG it uses each year. Approximately 90% of these imports come from West Asian nations.
Frequently Asked Questions
1. What caused the substantial rise in ATF prices in April?
Following the crisis involving Iran, Israel, and the United States, supply interruptions and rising global crude oil costs caused ATF prices to soar.
2. What impact would increased ATF prices have on airlines?
The significant increase will put pressure on airline profits and probably lead to higher passenger ticket prices because ATF accounts for 35ā45% of airline expenses.
3. What makes the Strait of Hormuz significant in this situation?
Since 20% of the world’s oil trade passes through the Strait of Hormuz, any blockade severely interrupts supplies and raises prices globally.
4. How will increases in LPG prices affect businesses?
Increased operational expenses for hotels, restaurants, and other businesses will result from higher commercial LPG rates, which might raise the cost of goods and services.
5. What makes India susceptible to changes in the price of LPG?
India is extremely vulnerable to geopolitical unrest and disruptions in the global supply chain because it imports between 60 and 65 percent of its LPG, primarily from West Asia.
Conclusion
Global tensions are driving up gasoline prices, which will affect consumers, companies, and airlines. Price increases for ATF and LPG could lead to inflation as well as higher living and travel costs.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice.
