Petrol and diesel prices in India may be heading towards another round of increases as surging crude oil prices and tensions in West Asia put pressure on oil marketing companies (OMCs), government finances and India’s import bill.
Economists told IndiaToday.in that the country is nearing a “fuel pricing inflexion point” as Brent crude prices climb back above $105 per barrel amid renewed uncertainty around the US-Iran conflict and the Strait of Hormuz, one of the world’s most important oil shipping routes.
But while fuel prices appear increasingly likely to rise, experts believe consumers are more likely to see gradual increases rather than a sudden steep shock, at least for now.
Manoranjan Sharma, Chief Economist at Infomerics Ratings, said the pressure is now being driven more by economic realities than policy choice.
“With Brent crude above $105 per barrel, fuel price hikes after May 15 are highly likely,” Sharma said.
IndiaToday.in had earlier reported, citing sources, that as rising prices squeeze oil marketing company margins.
It is likely that , while LPG cylinder prices may increase by Rs 40–50 as the government and oil companies assess the impact of elevated crude oil prices.
According to Sharma, oil marketing companies are currently absorbing massive losses by keeping retail fuel prices below market-linked levels.
“OMCs are losing about Rs 30,000 crore every month by unsustainably pricing below cost,” he said.
That pressure is becoming increasingly difficult to absorb if crude oil prices remain elevated for a prolonged period.
India imports more than 85% of its crude oil requirements, making domestic fuel prices highly sensitive to global oil movements and geopolitical disruptions.
Economists believe a sharp one-time increase in and prices is unlikely immediately because the government would want to avoid a sudden inflation shock.
Instead, smaller increases spread over time appear more probable.
“Gradual hikes of Rs 2–4 per litre are more likely to manage inflation and diffuse the impact,” Sharma said.
However, he warned that if crude prices remain elevated for a longer duration, policymakers may eventually adopt a mixed strategy involving an initial correction followed by smaller increases over time.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, also believes gradual price revisions would be more manageable than a steep increase.
“Increase in the price of diesel, petrol and even cooking gas is necessary now to manage the fiscal deficit within safe limits. This can be done gradually, rather than a steep one-off,” he said.
Prime Minister Narendra Modi’s recent appeal asking Indians to reduce fuel consumption, use public transport, adopt work-from-home practices wherever possible and avoid unnecessary foreign travel should also be viewed in the context of rising crude oil prices, economists said.
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Vijayakumar said the Prime Minister’s appeal should be viewed as a temporary response to elevated crude oil prices rather than a broad-based austerity programme.
“The appeal for austerity by PM Modi is a short-term strategy which will remain in place only as long as the West Asia tensions continue and crude prices remain elevated,” he said.
According to Vijayakumar, oil prices could cool quickly if geopolitical tensions ease. “The Strait of Hormuz may open any time and the price of crude can decline immediately,” Vijayakumar said.
He also stressed that the government’s appeal is mainly focused on expenditure linked to foreign exchange outflows such as petroleum, gold and chemical fertilisers.
“The call for austerity is confined to expenditure involving foreign exchange. Only industries related to these products will experience decline in demand,” he said.
Higher fuel prices rarely stay confined to petrol pumps. Transport becomes more expensive. Logistics costs rise. Food delivery charges can increase. Airfares and daily commuting costs go up.
Over time, companies also pass higher transportation costs to consumers through costlier goods and services.
That is why fuel prices have such an outsized impact on household budgets and inflation. Even moderate increases in petrol and diesel prices can gradually ripple across the broader economy.
At present, India’s retail inflation remains relatively contained, but economists warn that sustained crude oil prices above $100 per barrel could complicate the inflation outlook significantly.
Sharma said the combination of higher oil prices, widening import costs and pressure on the rupee is already creating macroeconomic stress.
“Overall, fuel price hikes now appear structurally unavoidable,” he said.
For now, however, economists believe consumers are more likely to face calibrated increases rather than a sudden fuel price shock.
Much will depend on whether crude oil prices cool down in the coming weeks or remain elevated amid continuing geopolitical tensions in West Asia.