Profit per Litre in Petrol and Diesel: Insights, Variations, and Factors

The profit per litre for petrol and diesel is a critical metric for fuel retailers and the broader economy. This profit varies significantly depending on a range of factors, including crude oil prices, local taxes, and the specific pricing strategies of oil companies.

Cost Structure and Profit Margins

The price of petrol and diesel comprises several key components, with the cost of crude oil being the most significant. Crude oil prices typically account for a substantial portion of the final retail price. Other factors include refining costs, distribution and marketing expenses, and taxes.

In many markets, retail fuel margins can range widely, from a few cents to over a dollar per litre. For example, in the United States, as of mid-2023, the profit margin for gasoline was often around 0.20 to 0.30 per gallon, with diesel margins generally being slightly higher due to supply and demand factors.

Market Variability and Geographic Differences

Profit margins can fluctuate based on market conditions. During high crude oil prices, margins might shrink due to competitive pressures, while during low oil prices, margins might expand. Additionally, profit margins can vary significantly across different regions and countries.

In some countries, government controls on fuel prices can limit the profit margins for fuel retailers. In contrast, less regulated markets offer more flexibility for companies to adjust prices based on market conditions.

Global Context: Refining Costs and Production Economics

The cost structure also varies greatly on a global scale. Major oil-producing nations like Russia and Saudi Arabia have oil fields with production costs as low as $1.60 to $3.00 per barrel, with some important giants having costs below $2.00. This translates to approximately 42 US gallons or about 158.98 liters of crude oil.

In the U.S., particularly with shale oil production, costs have significantly reduced over the years. Companies in the Bakken basin, which went online a bit later, managed to reduce their costs from around $40 per barrel to $35 by 2020. The U.S. energy policy aims to achieve self-sufficiency again, which has been partially achieved with the new production peak in 2016 following a 46-year-old peak in 1970. Early 2020 saw the highest production of any existing state, with production over 13 million barrels per day, including gas condensates and other liquids, potentially higher than even Soviet production in the late 1980s.

Profit After the Crude is Sold

The final price of refined petrol and diesel after the crude is sold also varies by country and company. Venezuela, for instance, offers the cheapest gasoline in the world, with prices at 0.02 US$/Liter, as a result of old US streetcultures running on fuel with poor efficiency. This is despite a high demand for fuel, partially because of poor car maintenance and the use of substandard vehicles.

In Bangladesh, you often see 'Frankenstein' cars, made up of parts from different sources, due to the country's economic challenges and restrictions on importing parts. This practice is more about necessity than luxury, as these vehicles are generally less fuel-efficient.

Understanding the profit per litre in petrol and diesel involves a comprehensive look at the cost structure, market dynamics, and global production economics. Ongoing fluctuations in crude oil prices, local regulations, and refining costs all play a crucial role in shaping these profits.