Oil prices spike! Will petrol, diesel rates be hiked in India as crude nears $80 mark on Middle East tensions?

Internationally, oil prices have risen by around 9-10% following Israel-US strikes on Iran, and amid the rising tensions in the Middle East are likely to remain elevated. Does that mean that petrol and diesel prices in India will go up?

Brent crude, the international benchmark, moved close to $80 per barrel, while US crude futures advanced 8.6 per cent to $72.79, compared with roughly $67 on Friday. Top executives in the consumer goods sector have expressed concern that rising crude oil prices, supply chain bottlenecks, weakening consumer confidence, and potential disruptions to Gulf remittances could undermine the fragile recovery in demand amid the ongoing Middle East conflict.



India, which meets about 88% of its crude oil demand through imports before refining it into fuels such as petrol and diesel, faces a higher import burden when global prices rise, along with possible inflationary effects.

Middle East tensions: Will petrol, diesel prices go up?

Despite the sharp increase in global oil prices, retail petrol and diesel prices in India are not expected to be revised upward in the immediate future, according to a PTI report.

According to sources quoted in the report, the government is maintaining a calibrated approach that allows oil marketing companies to improve margins during periods of lower international prices while protecting consumers when global rates increase.

Also Read | Middle East oil shock risks: How much do China, India, Japan depend on Middle Eastern crude, gas?

Pump prices for petrol and diesel have remained unchanged since April 2022. During this period, state-run retailers including Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd have absorbed losses when crude prices were elevated and benefited when prices declined.

As a result, domestic fuel prices have stayed steady even when global fuel rates climbed due to higher crude costs. Likewise, when international fuel prices softened in line with lower crude, retail rates in India did not see a reduction.

Sources added that the government intends to continue shielding consumers under this policy framework, unless crude prices witness an exceptionally sharp surge.

With assembly elections approaching in key states such as West Bengal, Tamil Nadu and Assam, the government is keen to avoid developments that could provide political ammunition to the opposition, the report said.

India assesses oil security

Amid intensifying hostilities in the Middle East, Oil Minister Hardeep Singh Puri on Monday assessed the crude oil, LPG and petroleum products situation in a meeting with senior officials from his ministry and executives of public sector oil companies.

Much of India’s crude oil and gas supplies transit through the Strait of Hormuz, which Iranian authorities have threatened to close following US and Israeli strikes.

“They have sufficient buffers to manage this kind of price spike,” a source with direct knowledge of the matter said, referring to oil companies. “We witnessed crude touching $119 per barrel in June 2022 after Russia’s invasion of Ukraine. That year their profits were modest, but in FY24 they recorded a record profit of Rs 81,000 crore.”

Should interruptions continue, cargoes may need to be diverted around the Cape of Good Hope, resulting in longer transit durations and higher transportation expenses, along with increased freight and insurance costs.

According to media accounts, the ongoing hostilities have in effect shut down the Strait of Hormuz, the vital artery for worldwide energy transportation. Nearly one-third of global seaborne crude oil exports and around 20 per cent of liquefied natural gas cargoes pass through this narrow channel.

Also Read | 1970s-style oil shock loading? Crude may hit $100 if Strait of Hormuz shuts amid Middle East tensions - what it means