Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Economy

Lowest Crude Price in 12 Years Means Only One Thing: The Government Will Tax You Some More

This would have been great news. The price of our crude imports is at the lowest in – well, a very long time.

ImportPrice

In fact, it’s the lowest price of crude, in dollars in the last 12 years (since December 2003).

Historical Crude Basket 

Why is it not good news?

Because the government will simply raise excise duties. It’s done that so far on every single dip in crude prices.

Look at the crude fall – from October 2010. And we now measure the crude price in rupees (to account for rupee depreciation). And while we got some benefit of lower prices, the bulk of the benefit has been kept by your friendly government:

Petrol diesel and Crude Comparison

However, this remains positive for airlines, whose ATF prices aren’t yet being hijacked by the government.

Soon the Middle east will give petrol for free, and you’ll still pay the Rs. 61 at the pump because the govt will just put that much as duty.

Our View: If you want to see prices fall and the economy recover, we have to see this benefit in our pockets. While it’s interesting that this government says it wants to reduce taxes and reduce the size of the government, all it’s doing is fattening itself up.

Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial