Global crude oil prices have finally slipped below the psychologically important $100-per-barrel mark after weeks of turmoil linked to the Iran conflict. But even as oil prices cool globally, Indian consumers are still facing repeated hikes in petrol and diesel prices.
As of 11:15 am, global prices moved lower amid hopes of easing tensions between the US and . WTI crude was trading at $90.80 per barrel, down 6% or $5.80, while Brent crude slipped 5.64% to $97.70 per barrel, falling by $5.84.
In fact, fuel prices in India have now been raised four times in less than two weeks, with prices increasing by nearly Rs 8 per litre during this period.
That has left many consumers asking a simple question: if crude oil prices are falling globally,
The answer lies in a mix of delayed price revisions, rupee weakness, taxes and losses accumulated earlier by state-run oil companies.
One important point often missed in the debate is that crude oil prices may have fallen below $100 now, but they had surged sharply over the past few months.
During the peak of the Iran conflict and fears around disruptions in the , global crude oil prices had moved close to $120 per barrel.
At that time, Indian oil marketing companies did not immediately pass on the full increase to consumers.
Instead, companies such as Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited continued selling fuel at lower prices despite rising import costs.
Now, even though crude prices have cooled somewhat,
That is one of the biggest reasons why petrol and prices are still rising despite the recent fall in crude oil.
Another important factor is that crude oil below $100 may sound cheap only because prices recently touched nearly $120.
Historically, however, $100 crude is still considered very expensive for an oil-importing country like India.
India imports nearly 85–90% of its crude oil requirements. That means even small changes in global oil prices can significantly impact India’s import bill and fuel costs.
So while crude has cooled from extreme highs,
Fuel prices in India are not determined by crude oil prices alone.
The value of the Indian rupee against the US dollar also plays a major role.
Oil is purchased globally in dollars. So when the rupee weakens, importing crude oil becomes more expensive even if global oil prices fall.
The rupee has weakened sharply in recent months and recently touched record lows near 97 against the US dollar before recovering slightly.
This has increased the cost of importing crude oil for Indian refiners.
“Structurally, India imports nearly 85% of its crude oil, so rupee depreciation against the US dollar increases import costs,” said Dr Manoranjan Sharma, Chief Economist at Infomerics Ratings.
Many consumers assume petrol prices move directly in line with crude oil prices. But that is not how India’s fuel pricing system works.
A large portion of the retail price of petrol and diesel comes from taxes.
Central excise duty, state VAT, dealer commissions, freight charges and refining costs all get added before fuel reaches consumers.
“Central and state governments also impose heavy excise duty and VAT on petrol and diesel, making taxes a major part of fuel prices,” Sharma explained.
This means retail fuel prices do not rise or fall at the same speed as crude oil prices.
According to experts, state-run oil marketing companies absorbed significant under-recoveries when crude oil prices surged sharply but domestic retail prices remained relatively stable.
“Oil marketing companies recover earlier losses incurred during periods of controlled pricing and high crude rates,” Sharma said.
That recovery process is now becoming visible through repeated fuel price hikes.
This also explains why petrol prices can continue rising temporarily even after global crude prices start cooling.
Although crude oil prices have fallen below $100 after signs of possible talks between the US and Iran, markets remain cautious.
The situation in West Asia is still uncertain and concerns around oil supply disruptions have not completely disappeared.
Any fresh escalation in the region could again push crude oil prices sharply higher.
“Refining, transportation, dealer commissions and geopolitical uncertainties also influence pricing,” Sharma said.
“Thus, crude oil price alone does not solely determine fuel prices in India; taxation and currency dynamics are also important,” he added.
The current fuel price situation highlights an important reality about India’s economy.
Even when global crude prices start falling, Indian consumers may not get immediate relief because retail fuel prices depend on multiple factors beyond crude oil alone.
Right now, India is dealing with elevated global crude prices, a weaker rupee, recovery of earlier OMC losses, and continued geopolitical uncertainty.
That combination is keeping fuel prices high despite crude oil cooling from recent peaks.