Crude oil near $80 per barrel: Could India see a drop in petrol, diesel and LPG prices?

oil dropped to around $80 per barrel today, while Brent crude fell nearly 4% to around $83.82 per barrel. The decline comes after reports that the US and Iran have agreed on a peace agreement and the reopening of the Strait of Hormuz. The development has eased concerns over disruptions in global energy supplies and raised hopes of lower fuel prices worldwide.

India, as a net importer of crude oil, relies heavily on energy supplies from the Middle East. Since a large share of the country’s crude oil and LPG imports passes through the Strait of Hormuz, the easing of tensions and reopening of the route could directly benefit India by improving supply and reducing import costs. Oil Marketing Companies (OMCs) have increased the prices of petrol, diesel and LPG in recent months as global crude oil prices surged.

However, key questions remain. Could India really see a fall in , diesel and LPG prices following this development? And should investors adjust their portfolios in response to this positive turn of events?

Petrol, diesel and LPG prices in metro cities

Will petrol, diesel and LPG prices fall?

Experts believe that while lower crude oil prices may improve the economics for OMCs, consumers may not immediately benefit from lower fuel prices.

According to Vaibhav Porwal, Co-founder of Dezerv, the government may choose to maintain current retail fuel prices for some time. “The government didn’t pass on the full impact of the energy price increase to consumers. They may hold prices at current levels to allow oil marketing companies to recover some of the losses before reducing prices,” he said.

The pricing suggests that while crude oil has corrected sharply, petrol, diesel and prices may not see an immediate reduction unless the decline in crude oil prices remains sustained.

Thomas Stephen, Director & Head – Preferred, Anand Rathi Shares and Stock Brokers, shared a similar view. He believes the more relevant benchmark for fuel pricing is the pre-conflict crude oil range of $60-$72 per barrel rather than the recent spike above $120.

“Viewed against that baseline, crude at $80 is still significantly higher, limiting the scope for an immediate reduction in retail fuel prices. The benefit of lower crude prices is first absorbed by oil marketing companies as they work to offset losses accumulated during months of selling fuel below prevailing costs. The situation is further complicated by the rupee’s weakness against the US dollar. With the exchange rate still hovering around ₹94–95 per dollar, the decline in crude prices provides only partial relief to import costs,” Stephen said.

According to market estimates cited by Stephen, every $1-per-barrel decline in crude oil prices can reduce petrol and diesel costs by roughly 50-60 paise per litre. “However, at current levels, much of this benefit is likely to be used to narrow existing under-recoveries rather than support immediate cuts in pump prices,” he says.

Stephen believes that “a more meaningful discussion around fuel price reductions would emerge only if crude oil falls towards the $65–70 per barrel range and remains there for a sustained period.”

What are analysts saying about crude oil prices?

Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, said crude oil prices continue to remain under pressure as markets unwind the geopolitical risk premium that had built up during the conflict.

“Crude oil prices are trading sharply lower after reports that the US and Iran have reached a preliminary agreement to end hostilities and reopen the Strait of Hormuz. The development has triggered a rapid unwinding of the geopolitical risk premium that had supported prices in recent months, with markets anticipating a gradual restoration of Middle Eastern oil and LNG flows,” Modi said.

According to him, “if crude flows through the Strait recover toward pre-war levels, concerns over global supply tightness could ease considerably. However, lingering geopolitical risks and potential disruptions during the implementation phase may limit the downside in the near term.”

Stephen shared that, “The peace deal, however promising, is not yet fully operational. The Strait of Hormuz remains in the process of being reopened, and global shipping operators who spent months rerouting tankers, paying war-risk insurance premiums, and absorbing freight cost surges will not return to normal transit patterns overnight.”

He added, “Persian Gulf producers that curtailed output during the blockade will need weeks to restore supply. Crude prices, in other words, could easily drift back upward if implementation of the deal stalls.”

Who will benefit from the lower crude oil prices?

While consumers may not immediately benefit at the fuel pump, lower crude oil prices could create opportunities across several sectors of the economy.

According to Porwal, companies that consume large quantities of commodities and raw materials are likely to be among the biggest beneficiaries. “The impact will be on consumers of commodities. Raw material prices will fall for them, and that should lead to a positive impact,” he said.

Stephen elaborated that “airlines are among the biggest winners, since fuel makes up a large share of their operating costs. Paint manufacturers are also likely to benefit, as crude-based derivatives are a key component of their raw material expenses. For chemical companies, especially those reliant on imported feedstocks lower energy prices could lead to reduced input costs and improved profit margins.

Consumer-oriented industries such as FMCG, logistics, transport and automobiles may benefit indirectly from lower freight and distribution costs. Additionally, a stable, low crude price environment can help keep inflation in check, boost consumer spending and create more favourable conditions for discretionary consumption.”

Should mutual fund investors consider making any changes to their portfolios?

Though lower crude oil prices may improve the outlook for several sectors, experts believe investors should avoid making portfolio changes based solely on short-term movements in energy markets.

Stephen mentioned that, “instead of attempting to time the market by pursuing short-term rallies in energy or stocks or invest into thematic fund, investors can take advantage of the easing supply situation by concentrating on well-diversified, core portfolios. Such portfolios are likely to benefit from moderating inflation and more stable corporate margins.

For instance, diversified equity funds including flexi-cap and large-cap options stand to gain as lower crude prices help ease inflation and reduce input costs, supporting a recovery in broad-market corporate earnings. Broad-based funds, in particular, are well-positioned to capture this domestic upswing.”

Porwal also said, “We continue to recommend diversified fund allocation and with a focus on domestic sensitives and cyclicals.”