Retail petrol and diesel prices in India are unlikely to be increased in the near term despite global crude oil prices rising sharply after US and Israeli strikes on Iran, PTI reported, citing sources.
International oil prices rose about 9 per cent, with Brent crude climbing close to $80 per barrel. US-traded crude rose 8.6 per cent to $72.79, up from around $67 on Friday.
India, which imports 88 per cent of its crude oil requirements, faces a higher import bill and potential inflationary pressure when global prices rise. However, sources said retail fuel prices are not expected to be revised immediately as the government continues with its calibrated pricing approach.
Under this policy, oil marketing companies build margins when international crude prices are low and absorb pressure when prices rise. Retail petrol and diesel prices have remained unchanged since April 2022, with Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) absorbing losses during periods of high crude prices and making profits when rates soften.
This approach ensured domestic fuel prices remained stable even when global fuel rates surged. Likewise, when crude prices declined globally, pump prices in India were not reduced.
Sources said the government intends to continue shielding consumers unless crude prices see a sharp and sustained spike. With assembly elections approaching in West Bengal, Tamil Nadu and Assam, officials indicated there is no appetite for a price increase that could trigger political backlash.
As tensions escalated in the Middle East, Oil Minister Hardeep Singh Puri on Monday reviewed the situation concerning crude oil, LPG and other petroleum products with senior ministry officials and public sector companies.
India imports 88 per cent of its crude oil and roughly half of its natural gas requirement. Much of these supplies transit through the Strait of Hormuz, which Iranian authorities have threatened to shut following the attacks.
“We are continuously monitoring the evolving situation and all steps will be taken in order to ensure availability and affordability of major petroleum products in the country,” the ministry said in a post on X.
Following the US and Israeli strikes on Iranian government, military and nuclear facilities, Iran warned ships away from the Strait, while insurers withdrew coverage, effectively halting tanker movements.
Roughly one-third of global seaborne crude oil exports and about 20 per cent of global LNG shipments pass through the Strait of Hormuz. India, the world’s third-largest oil importer, sources around half of its crude imports through this route.
Officials said oil companies have sufficient financial cushion to withstand the current spike. “We have seen prices rise to $119 per barrel in June 2022 in the aftermath of Russia’s invasion of Ukraine. That year they had nominal profits but in FY24 they posted record ₹81,000 crore profit,” a source said.
The three state-run oil marketing companies posted ₹23,743 crore profit in the December quarter alone this year.
However, the situation could turn challenging if the Strait closure persists. While crude inventories are adequate in the near term, LNG supplies may become tight because most volumes are tied up in long-term contracts, with limited availability in the spot market.
Crisil Intelligence Director Sehul Bhatt told PTI, developments in the Middle East could heighten pricing and procurement risks for both crude oil and LNG.
“If geopolitical issues ease, we expect prices to average USD 65-70 in CY2026, but prolonged conflict could push prices even higher,” Bhatt said.
He noted that while Iran accounts for 4.5-5 per cent of global oil supply, the larger concern is disruption at the Strait of Hormuz, which is critical for nearly half of India’s crude and LNG imports.
“Sustained disruptions would keep crude prices elevated and tighten LNG availability, underscoring the need for strategic planning to protect India’s energy security,” Bhatt added.
Moody’s Analytics warned that closure of the Strait raises the risk of wider disruptions across the Middle East and Red Sea region, while Wood Mackenzie said oil prices could exceed $100 per barrel if tanker traffic through the Strait is not swiftly restored.
Despite the geopolitical escalation, sources maintained that India’s diversified sourcing strategy, inventory buffers and pricing mechanism are expected to prevent any immediate increase in retail fuel prices.
