Paying more for less crude, India's oil companies pass the bill to drivers
Since the Gulf crisis began, refiners have been buying smaller volumes at sharply higher cost. After months of absorbing losses, they began passing them on.
Since the Gulf crisis began on February 28, India's three state-run oil retailers — Indian Oil, Bharat Petroleum, and Hindustan Petroleum, which together control about 90 per cent of the country's market — have been paying more money for less crude. They absorbed losses for nearly three months. This week, they passed the burden along.
A fourth pump-price revision in 10 days lifted petrol in Delhi to Rs 102.12 and diesel to Rs 95.2. These cumulative gains of 7.8 per cent and 8.6 per cent, respectively, have put both fuels at their highest level since May 2022.
The pump-price arithmetic is only the visible face of a much larger one. India's monthly crude oil import bill hit $13.07 billion in March 2026, the highest in at least 15 months, even as the volume of crude shipped actually fell. The per-tonne cost of imported crude jumped from $451 in January to $688 in March, a 53 per cent surge in two months, even as the volume of barrels shipped into India fell sharply.
By the Petroleum Ministry's own admission, the gap between what the three companies paid for imported barrels and what they charged at the pump for petrol, diesel, and cooking gas was running at about Rs 1,000 crore a day through the first half of May.
WHY NOW?
The Strait of Hormuz is the immediate trigger. The narrow channel between Iran and Oman, which normally handles around a fifth of the world's daily oil and gas trade, has been mostly closed to commercial shipping since the US-Israel-Iran war began.
The Petroleum Ministry has now put a number on the disruption. About 40 per cent of India's crude oil imports have been affected, along with 90 per cent of liquefied petroleum gas and nearly 65 per cent of natural gas, Joint Secretary Sujata Sharma said on Monday.
Refiners are paying both higher Brent prices, which have climbed from about $63.80 a barrel on February 28 to around $110 in late May, and a war-risk premium on shipping. The rupee has weakened in parallel, which lifts the price of every imported barrel.
To keep cooking-gas cylinders on the shelf, refinery LPG output has been ramped up to roughly 50,000 tonnes a day, Sharma said. That is the visible piece of the government's domestic supply response. Delhi's pump board numbers remain the same; the shock arrivals on the consumer side occur with a lag.
THE BULK-TO-RETAIL FLIP
State refiners are selling diesel to industrial buyers at premiums of at least Rs 40 a litre over the retail pump price. The arithmetic has flipped: it is cheaper for trucking firms, manufacturers, and even some power generators to fuel up at neighbourhood petrol pumps than to take bulk deliveries. Demand at retail outlets has surged accordingly.
Indian Oil said diesel sales at its retail outlets climbed 18 per cent in the first 22 days of May from a year earlier, with petrol sales up 14 per cent. The surge has caused fuel dry-outs at several stations and raised concerns about wider supply pressures heading into the summer travel season.
However, she cautioned that the spike could partly reflect routine seasonal demand from agriculture farmers drawing diesel for tractors and irrigation pump sets at the start of the kharif sowing window. The data does not yet cleanly separate the two.
The supply position itself is comfortable, she said, urging consumers not to panic-buy. Either way, the queues are real.
WHERE IT LANDS
Not every forecaster agrees on how much of a hit India's growth takes. The Reserve Bank of India still expects GDP to expand 6.9 per cent in the fiscal year to March 2027. The International Monetary Fund puts the calendar-year 2026 number at 6.5 per cent. Goldman Sachs has cut its estimate by 0.6 percentage points to 5.9 per cent. Those are wide bands for a single year, and the spread itself signals how much the war's path matters.
Finance Minister Nirmala Sitharaman defended the Prime Minister's appeal in Mumbai on Monday after opposition parties criticised it as an inadequate response to the price pain.
“The Middle East crisis is not only a diplomatic or geopolitical issue. For businesses and common people, it can mean higher fuel costs, delayed cargo, costlier shipping, shortage of inputs, pressure on working capital and uncertainty in export orders,” she said.
The next move sits with the central bank. The Monetary Policy Committee meets on June 3–5. Across the region, Indonesia, the largest economy in Southeast Asia, has already raised its main policy rate by 50 basis points to 5.25 per cent to shore up the rupiah against the same crude shock. India has held rates so far, but a meaningful rupee slide or a fresh leg up in Brent would narrow Mint Street's options.
The freeze that held through India's five-state elections has cracked. The next question, whispered at every fuel pump from Patna to Bangalore, is whether Rs 102 was the peak or just the next stop on a road that runs through Tehran.
Since the Gulf crisis began on February 28, India's three state-run oil retailers — Indian Oil, Bharat Petroleum, and Hindustan Petroleum, which together control about 90 per cent of the country's market — have been paying more money for less crude. They absorbed losses for nearly three months. This week, they passed the burden along.
A fourth pump-price revision in 10 days lifted petrol in Delhi to Rs 102.12 and diesel to Rs 95.2. These cumulative gains of 7.8 per cent and 8.6 per cent, respectively, have put both fuels at their highest level since May 2022.
The pump-price arithmetic is only the visible face of a much larger one. India's monthly crude oil import bill hit $13.07 billion in March 2026, the highest in at least 15 months, even as the volume of crude shipped actually fell. The per-tonne cost of imported crude jumped from $451 in January to $688 in March, a 53 per cent surge in two months, even as the volume of barrels shipped into India fell sharply.
By the Petroleum Ministry's own admission, the gap between what the three companies paid for imported barrels and what they charged at the pump for petrol, diesel, and cooking gas was running at about Rs 1,000 crore a day through the first half of May.
WHY NOW?
The Strait of Hormuz is the immediate trigger. The narrow channel between Iran and Oman, which normally handles around a fifth of the world's daily oil and gas trade, has been mostly closed to commercial shipping since the US-Israel-Iran war began.
The Petroleum Ministry has now put a number on the disruption. About 40 per cent of India's crude oil imports have been affected, along with 90 per cent of liquefied petroleum gas and nearly 65 per cent of natural gas, Joint Secretary Sujata Sharma said on Monday.
Refiners are paying both higher Brent prices, which have climbed from about $63.80 a barrel on February 28 to around $110 in late May, and a war-risk premium on shipping. The rupee has weakened in parallel, which lifts the price of every imported barrel.
To keep cooking-gas cylinders on the shelf, refinery LPG output has been ramped up to roughly 50,000 tonnes a day, Sharma said. That is the visible piece of the government's domestic supply response. Delhi's pump board numbers remain the same; the shock arrivals on the consumer side occur with a lag.
THE BULK-TO-RETAIL FLIP
State refiners are selling diesel to industrial buyers at premiums of at least Rs 40 a litre over the retail pump price. The arithmetic has flipped: it is cheaper for trucking firms, manufacturers, and even some power generators to fuel up at neighbourhood petrol pumps than to take bulk deliveries. Demand at retail outlets has surged accordingly.
Indian Oil said diesel sales at its retail outlets climbed 18 per cent in the first 22 days of May from a year earlier, with petrol sales up 14 per cent. The surge has caused fuel dry-outs at several stations and raised concerns about wider supply pressures heading into the summer travel season.
However, she cautioned that the spike could partly reflect routine seasonal demand from agriculture farmers drawing diesel for tractors and irrigation pump sets at the start of the kharif sowing window. The data does not yet cleanly separate the two.
The supply position itself is comfortable, she said, urging consumers not to panic-buy. Either way, the queues are real.
WHERE IT LANDS
Not every forecaster agrees on how much of a hit India's growth takes. The Reserve Bank of India still expects GDP to expand 6.9 per cent in the fiscal year to March 2027. The International Monetary Fund puts the calendar-year 2026 number at 6.5 per cent. Goldman Sachs has cut its estimate by 0.6 percentage points to 5.9 per cent. Those are wide bands for a single year, and the spread itself signals how much the war's path matters.
Finance Minister Nirmala Sitharaman defended the Prime Minister's appeal in Mumbai on Monday after opposition parties criticised it as an inadequate response to the price pain.
“The Middle East crisis is not only a diplomatic or geopolitical issue. For businesses and common people, it can mean higher fuel costs, delayed cargo, costlier shipping, shortage of inputs, pressure on working capital and uncertainty in export orders,” she said.
The next move sits with the central bank. The Monetary Policy Committee meets on June 3–5. Across the region, Indonesia, the largest economy in Southeast Asia, has already raised its main policy rate by 50 basis points to 5.25 per cent to shore up the rupiah against the same crude shock. India has held rates so far, but a meaningful rupee slide or a fresh leg up in Brent would narrow Mint Street's options.
The freeze that held through India's five-state elections has cracked. The next question, whispered at every fuel pump from Patna to Bangalore, is whether Rs 102 was the peak or just the next stop on a road that runs through Tehran.
