Petrol prices face fresh pressure as global oil shock deepens

India’s fuel-price equation is coming under renewed pressure as a sharp rise in international oil and refined-product prices collides with growing geopolitical risks across West Asia.

India’s petrol pricing benchmark has risen to $133.05 a barrel in September, its highest level in 50 months, according to industry officials and official data cited by Hindustan Times. The average benchmark price between September 1 and 18 was about 20% above August’s average of $110.87 a barrel, and also exceeded the previous peak of $129.63 recorded in May.

The immediate concern is that the rise is no longer confined to crude oil. Disruptions around the Strait of Hormuz and the Bab el-Mandeb are pushing up tanker freight, insurance and fuel costs, making the economics of importing and refining crude increasingly difficult for Indian oil marketing companies (OMCs).

Tanker charter rates for voyages to India have more than doubled to around $250,000 a day, while bunker fuel costs have risen 50% and insurance costs have increased by about 20%, according to industry sources cited by Hindustan Times. A prolonged disruption around Bab el-Mandeb could also force some tankers to take longer routes, adding further costs and delays.

The pressure is already visible in OMC margins. With Brent crude moving above $100 a barrel earlier this month, government-owned fuel retailers were estimated to be losing around ₹5 a litre on petrol and ₹23 a litre on diesel. India imports more than 88% of its crude requirements, leaving domestic fuel economics particularly sensitive to global prices and the rupee-dollar exchange rate.

For consumers, however, the impact has so far been muted at the pump. Petrol and diesel prices have remained unchanged since May 25, when petrol was increased by ₹2.61 a litre and diesel by ₹2.71. Mumbai’s petrol price was ₹111.21 a litre on September 21, while Delhi’s stood at ₹102.12. That stability could become harder to maintain if the current oil-price shock persists.

Earlier this month, industry sources indicated that OMCs could absorb crude prices around $85-90 a barrel, while sustained prices above $95-100 could force a rethink on retail fuel prices. With international crude now above that threshold, and refined-product and shipping costs also elevated, the pressure for another adjustment is building.

That does not necessarily mean an immediate or proportionate increase at petrol pumps. The government and OMCs have previously absorbed part of the shock to protect consumers from abrupt increases. But every additional week of elevated crude prices increases the financial burden on fuel retailers.

The wider economic implications could also become significant. Higher crude prices raise India’s import bill, put pressure on the rupee, and can feed into inflation through transportation, logistics and energy costs. Industry estimates suggest that every $1 increase in crude prices can add around ₹18,000 crore to India’s annual import bill.

The key variable, therefore, is duration. If tensions ease and oil flows normalise, some of the pressure could unwind. If disruptions through Hormuz and Bab el-Mandeb persist, the probability of higher petrol and diesel prices in India will increase as OMC losses accumulate.

For motorists, the immediate price at the pump may still look familiar. The global oil market underneath it is becoming considerably more expensive.