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India experienced its fourth price hike for petrol and diesel in two weeks amidst oil market volatility worldwide, with Delhi reporting petrol rates as ₹102.12 per litre. The revision took place on Monday morning.
It seems inflationary pressures are set to increase along with the cost of transportation in the country.
This price revision reflects the costs passed on by the oil companies due to the increasing crude oil prices due to geopolitical tensions following the US-Israel conflict and restriction in the Strait of Hormuz.
Here are the Fuel Prices in Major Indian Cities (After Fourth Hike, May 25):
The above data shows that there has been a uniform increase of ₹7.50 per litre of petrol in ten days across major metro cities. Bengaluru and Mumbai have the highest costs due to the VAT imposed on the central rate of petrol.
This news will be a shock to their budget for millions of salaried employees working and commuting daily. If someone uses 40 litres of petrol a month, they will end up paying almost ₹300 more than they did a few weeks ago.
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One small relief is that the price revisions reflect the correction made to the months of losses by oil marketing companies. This ensures that they remain healthy in terms of finances, which reduces the chances of fuel shortage in the long run.
Investors of energy sector stock saw prices going up after Monday’s announcement. For those who have revised their budgets to include this adjustment, they can now enjoy better prices than they were expecting otherwise.
Analysts have pointed out that as long as oil prices stay high, another increase in retail fuel prices in India is likely. Petrol and diesel rates may go up by around ₹15–25 if crude oil prices do not fall.
It should be noted that India relies almost completely on imported oil to meet around 85% of its requirement. Therefore, the retail price of fuel depends not only on crude prices but also on the rupee rate. Any weakness of the rupee makes matters worse.
Analysts have suggested two possible solutions. It is possible for the government to introduce a partial reduction in the excise duty. This is something that the government has done in the past without placing additional burden on the OMCs.
They can reach a diplomatic solution to bring stability to West Asia and reopen the Strait of Hormuz for normal shipping will help bring down Brent crude prices. At present, OPEC is restricting crude oil production to deal with it. The best case scenario would be a solution with the Iranians and Americans to reopen the Strait of Hormuz.
India’s fuel price problems are, for now, part of the global crisis playing out at the local gas station. There is no immediate respite with West Asia still unsettled and the rupee remaining weak. India’s next move on excise duty is crucial for millions of people.
What caused the fuel prices increase in India?
The rise of petrol and diesel prices in India can be linked to the increases of crude oil prices globally, due largely to tensions in West Asia and issues surrounding the Strait of Hormuz. As India is a heavy importer of its crude oil, when its currency value declines, the total cost rises, thus increasing fuel prices.
How much have fuel prices increased recently?
The fuel prices in India have gone up nearly ₹7.5 per litre. The most recent increase saw petrol prices increase by ₹2.61 litres, while at the same time, diesel prices increased by ₹2.71 litres.
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