The Rs 3-per-litre increase in petrol and diesel prices announced on Friday may not be a one-time adjustment, with experts warning that fuel prices could continue rising over the next three to four months if global crude oil prices remain elevated.
The warning comes as Brent crude prices neared the $110-per-barrel mark on Friday amid escalating tensions in West Asia and growing concerns around disruptions to global oil supplies.
Petrol and diesel prices in India as state-run oil marketing companies (OMCs) came under mounting pressure from rising crude oil costs.
Experts say the latest increase may only partly offset the losses currently faced by OMCs if crude oil prices continues to remain high.
“Revisions in fuel prices were somewhat expected as oil marketing companies are stretching their limits while absorbing high energy prices,” Gurmeet Singh Chawla, Managing Director at Master Portfolio Services Limited, told IndiaToday.in.
“With Brent crude already nearing $110 per barrel, further revision in petrol and diesel prices also remains plausible over the next three to four months if crude oil holds above the $90-100 per barrel range for an extended period,” he added.
Dhaval Popat, Energy Analyst at Choice, also said the current hike provides only partial relief to state-run oil companies.
“While the current hike of up to Rs 3/litre in petrol and diesel prices provides partial relief to the profitability pressures faced by state-run OMCs, the magnitude of current under-recoveries remains significantly elevated,” Popat told IndiaToday.in.
According to Popat, every Rs 1-per-litre increase in fuel prices can improve annualised EBITDA by roughly Rs 15,000–16,000 crore for the three PSU oil marketing companies combined.
“That means the latest hike could translate into an annualised earnings benefit of nearly Rs 45,000–48,000 crore across OMCs,” he said.
However, Popat warned that further price hikes may still be required if crude oil prices continue rising globally.
“In the current backdrop, provided there is no change in the global scenario and crude prices continue to build, a rise of around Rs 10/litre overall would be required to offset the losses,” he said.
India imports nearly 85% of its crude oil requirements, making domestic fuel prices highly sensitive to global crude oil movements and geopolitical disruptions.
The ongoing tensions in West Asia, particularly concerns surrounding the Strait of Hormuz — a key global oil shipping route — have sharply increased fears of supply disruptions, pushing crude oil prices higher globally.
Analysts say prolonged crude oil strength could continue putting pressure on the profitability of oil marketing companies unless retail fuel prices are revised further.
At the same time, economists warn that repeated fuel price hikes could by raising transportation and logistics costs across sectors.
However, experts say government intervention could still play an important role in limiting the extent of future fuel price hikes.
“Government intervention, particularly through excise duty rationalisation, is also a variable to consider as a modest cut in excise could meaningfully absorb market pressure without requiring OMCs to pass the full burden to consumers,” Chawla said.
Popat also noted that the magnitude of future hikes would depend heavily on whether crude oil prices cool from current levels.
“If crude prices consistently soften from the current levels, the magnitude of hikes required will be lower,” he said.
For now, much will depend on whether crude oil prices cool from current levels or continue rising as geopolitical tensions persist.
Analysts say if global oil prices remain elevated for a prolonged period, Indian consumers may need to prepare for the possibility of more fuel price hikes in the months ahead.