Fuel Prices Surge: What’s Behind the Recent Hike in India?

Significant Increase in Fuel Prices

New Delhi: On Friday, the prices of petrol and diesel saw an increase of Rs 3 per litre, marking the end of a four-year period without any adjustments in rates by state-owned oil companies.

In the national capital, petrol is now priced at Rs 97.77 per litre, up from Rs 94.77, while diesel costs Rs 90.67, a rise from the previous Rs 87.67, as reported by industry insiders.

This adjustment represents only a fraction of the necessary increase to reflect the rise in global energy prices triggered by the ongoing conflict in West Asia.

Despite a significant rise in input costs, state-owned oil companies maintained stable fuel prices for 11 weeks until financial sustainability became a concern, prompting this increase.

Fuel prices had been frozen since April 2022, with a minor reduction of Rs 2 per litre for both petrol and diesel occurring in March 2024, just ahead of the Lok Sabha elections.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) halted daily price adjustments in April 2022 to shield consumers from the steep price hikes that were necessary due to soaring international oil prices following Russia's invasion of Ukraine.

These companies faced substantial losses during the first half of the 2022-23 fiscal year, which they managed to recover as prices fell in the following months.

However, the recent conflict in West Asia has caused international oil prices to surge by over 50%.

Before the outbreak of the conflict, the average price of crude oil imported by India was USD 69 per barrel in February, which escalated to USD 113-114 per barrel in the months that followed.