Fuel Prices Surge Again Amid Global Tensions
Recent Increases in Fuel Prices
On Saturday, May 23, petrol and diesel prices saw another rise, marking the third increase in under ten days. This adjustment by state-run oil marketing companies comes as a response to escalating global crude prices, which have been influenced by ongoing tensions in West Asia. In the capital city of Delhi, petrol prices increased by 87 paise per litre, moving from Rs 98.64 to Rs 99.51. Similarly, diesel prices rose by 91 paise, from Rs 91.58 to Rs 92.49 per litre. This latest adjustment follows previous hikes of Rs 3 per litre on May 15 and an additional 90 paise increase on May 19, resulting in a total surge of nearly Rs 5 per litre in a short timeframe.
The recent price hikes are largely attributed to a significant rise in global crude oil prices, which soared above $120 per barrel due to severe disruptions in the Strait of Hormuz amid the ongoing US-Israeli conflict with Iran. Although prices have since stabilized between $100 and $105 per barrel, oil marketing companies (OMCs) continue to face substantial pressure.
India had maintained stable retail fuel prices for nearly 11 weeks, despite the rising costs of international energy. However, sources indicate that the financial losses incurred by state-owned fuel retailers have rendered the existing pricing model unsustainable. Prices had remained unchanged since April 2022, with only a minor Rs 2 per litre reduction in both petrol and diesel in March 2024, just before the Lok Sabha elections.
Potential for Further Increases
Experts Warn of Additional Price Hikes
Economists and market analysts suggest that the recent increases may not be the last for consumers. Madan Sabnavis, Chief Economist at Bank of Baroda, previously stated that the losses faced by oil marketing companies made further price hikes unavoidable. He indicated that additional increases might be necessary, as current fuel prices do not adequately cover the losses experienced by OMCs.
Financial services firm Emkay Global has forecasted that petrol and diesel prices could rise by as much as Rs 10 per litre in the upcoming weeks. In a report released on May 15, the firm noted, “We anticipate hikes of Rs 10 per litre to address approximately 50 percent of under-recoveries, either in one go or through gradual increases over the next 2-3 weeks.”
Financial Strain on Oil Companies
Oil Companies Facing Significant Losses
Emkay Global estimates that oil marketing companies are currently incurring losses of around Rs 17-18 on every litre of fuel sold, even after the Centre's reduction of excise duty on fuel imports by Rs 10 per litre on March 27, 2026. The report cautioned that OMCs could face quarterly losses ranging from Rs 570-580 billion (Rs 57,000-58,000 crore), raising concerns about the long-term viability of fuel retail operations.
Bharat Petroleum (BPCL) has also acknowledged ongoing pressure on its profit margins. The company's chairman stated earlier this week that BPCL continues to experience a revenue loss of 25 to 30 rupees per litre on diesel and 10 to 14 rupees per litre on petrol, despite the recent price hikes. Meanwhile, India's oil ministry has confirmed that there are currently no plans to provide financial support to refiners.
BPCL, Indian Oil Corporation, and Hindustan Petroleum together manage over 90 percent of India's 103,000 fuel stations and typically adjust fuel prices in coordination with one another.