after the government sharply raised import duty on the precious metal. Now, fears are growing that petrol and diesel prices could be next if the Middle East crisis continues to keep global crude oil prices elevated.
The concern is no longer just market speculation.
Over the past few days, Prime Minister , RBI Governor Sanjay Malhotra and even the International Monetary Fund (IMF) have all indicated, directly or indirectly, that India may not be able to indefinitely shield consumers from the global oil shock triggered by the Iran conflict and disruptions around the .
What has also caught attention is the series of mixed signals coming from the government.
First, PM Modi urged people to conserve fuel, reduce unnecessary travel, adopt work-from-home where possible and even to help conserve foreign exchange reserves.
Then, the Petroleum Ministry reassured citizens that India has enough fuel reserves and that supply remains stable.
But shortly after that, the Prime Minister again stressed the need to use fuel responsibly and, according to reports, even asked officials to reduce the number of vehicles in convoys. Economists say this combination of cautionary messaging and reassurance suggests that while there is no immediate crisis, the government is clearly preparing for a prolonged period of high energy prices and pressure on imports.
On Wednesday, the , sharply increasing domestic prices of both metals.
The move came days after PM Modi publicly said: “- has become so expensive across the world. It is the responsibility of all of us that the foreign exchange spent on purchasing petrol-diesel should also be saved by conserving petrol-diesel.”
He also appealed to people not to buy for weddings for one year.
The warning signs became stronger after if the West Asia crisis continues for a prolonged period.
“If this is to continue for longer period of time, it is just a matter of time before the government will pass on some of the price increases,” Malhotra said during an international conference in Switzerland.
The IMF has also backed passing on higher prices to consumers while saying India still has room to manage the current energy shock.
Even as concerns rise, the government has tried to reassure citizens that India’s fuel supply situation remains stable.
According to a recent PIB release, an officer from the Ministry of Petroleum and Natural Gas said India’s crude oil supply remains secure despite tensions around the Strait of Hormuz.
The ministry official said India’s daily crude oil consumption is around 55 lakh barrels and that current supplies secured through diversified procurement are higher than what would normally have arrived through the Strait of Hormuz during this period.
The official also said India now imports crude oil from around 40 countries and nearly 70% of crude imports now come from routes outside the Strait of Hormuz, compared with around 55% earlier.
“Two additional crude cargoes are already on the way and will arrive in the coming days, further strengthening the crude oil supply position,” the official said.
The ministry also said refineries across the country are operating at very high capacity utilisation levels, in some cases above 100%.
Despite the government’s reassurance on supply, economists say the bigger issue is pricing pressure if global crude oil prices remain high for an extended period.
India imports nearly 85% of its crude oil requirements, making the economy highly vulnerable to geopolitical disruptions.
Brent crude prices have surged sharply in recent weeks amid escalating tensions in West Asia.
Dr Manoranjan Sharma, Chief Economist at Infomerics Ratings, told India Today that if the Middle East conflict continues disrupting crude supplies and shipping routes, a fuel price hike becomes increasingly likely.
“A fuel price hike is certain, should the Middle East conflict continue disrupting crude supplies and shipping routes,” Sharma said.
He explained that oil marketing companies are currently absorbing part of the increase through lower margins, but this cannot continue indefinitely.
“If Brent crude remains above critical levels for a sustained period, gradual increases rather than sudden sharp hikes are on,” he said.
According to Sharma, the government may temporarily reduce excise duties to soften the impact, but eventually some burden may still need to be passed on to consumers.
Economists say the Prime Minister’s comments on fuel and gold were linked by one key issue: pressure on India’s foreign exchange reserves and the rupee.
India is one of the world’s biggest importers of both crude oil and gold. Since both are largely purchased in US dollars, higher imports increase dollar outflows and widen the current account deficit (CAD).
“The government’s appeal to conserve fuel and reduce gold purchases aims to protect India’s external financial stability,” Sharma said.
“Higher crude oil imports widen the current account deficit and put pressure on the rupee. Gold imports also significantly increase dollar outflows because India is one of the world’s largest gold consumers,” he added.
The government’s reassurance that India has fuel reserves for around 60 days was aimed at preventing panic while still encouraging responsible consumption, Sharma explained.
So far, the government and state-run oil companies have protected consumers from the full impact of rising crude oil prices.
But economists warn this strategy cannot continue forever.
“India’s strategy of shielding consumers from global crude oil price increases cannot continue indefinitely,” Sharma said.
He noted that oil marketing companies can absorb losses only to a certain extent before profitability and investment capacity weaken.
At the same time, the government also faces fiscal pressure because cutting fuel taxes reduces revenue used for welfare spending and infrastructure projects.
“So far, strong tax collections and relatively stable inflation have provided some cushion. However, if global crude prices stay elevated for several months, either fuel prices must rise or fiscal burdens will intensify,” Sharma said.
He also warned that prolonged under-recoveries could discourage private sector participation in fuel retail markets and distort long-term energy pricing efficiency.
Oil Minister Hardeep Singh Puri has also publicly admitted concerns over how long oil companies can continue absorbing losses while selling fuel below market-linked rates.
According to Sharma, if fuel prices are eventually increased, depending on crude oil prices and tax adjustments.
Even modest increases could affect almost every part of the economy.
“Fuel costs influence transportation, manufacturing, agriculture and logistics,” Sharma said.
He warned that food prices may rise as freight expenses increase, putting pressure on household budgets, especially for middle- and lower-income families.
“Businesses will transmit higher operating costs onwards, slowing demand in sectors like retail and automobiles,” he added.
Economists also warn that prolonged inflation could force the RBI to keep interest rates elevated for longer, affecting loans, EMIs and overall economic growth.
For now, petrol and diesel prices remain unchanged. But after gold became more expensive following the import duty hike, concerns are clearly growing that fuel may eventually become costlier too if the global oil shock continues.