Petrol Prices Stay Put For Now

If the conflict continues for a prolonged period, State-run oil companies may have to review retail fuel prices accordingly.

Retail prices of petrol and diesel in India are unlikely to be raised in the "foreseeable future" despite crude oil prices surpassing $100 per barrel on Monday, a senior government official said.

Brent crude briefly jumped to an intraday high of $119 per barrel in the futures market and nearly $117 in the spot market after West Asian producers slashed output and supplies were further choked through the strategically important Strait of Hormuz amid the ongoing Iran war.

This was the highest level for the petroleum benchmark since March 2022, when it had nearly touched $134 per barrel following Russia's invasion of Ukraine.

Brent had earlier peaked at a high of $145.7 per barrel in July 2008 during the initial stages of the global financial crisis.

On Monday, prices eventually cooled to around $103 per barrel, still up more than 10 per cent, following discussions on a coordinated release of oil reserves by the G7 nations to manage the crisis.

Crude Oil Crosses $100

Despite the latest surge in petroleum prices, State-run oil marketing companies (OMCs) are financially well-positioned to absorb the impact of high international crude prices in the near term, said the government official.

However, if the conflict continues for a prolonged period, the companies may have to review retail fuel prices accordingly.

Petrol, Diesel Prices Unchanged

The conflict has also disrupted supplies of liquefied petroleum gas (LPG), prompting the government to prioritise domestic consumers over commercial and industrial users such as hotels and restaurants.

"We are in a war situation. Commercial LPG users may be impacted. Other measures to ensure supplies to domestic consumers are in force," the official said.

LPG Supplies Hit by Conflict

Amid the struggle to secure energy supplies from West Asia, State-run OMCs last week increased the price of domestic LPG by Rs 60 per cylinder and commercial LPG by Rs 114.5 per cylinder nationwide.

India sources around 85 per cent of its LPG imports from West Asian countries, most of which transit through the Strait of Hormuz.

India Seeks LPG From US

Apart from contractual supplies, Indian refiners are seeking additional LPG cargo from the United States, according to a refinery executive aware of the development.

State-run OMCs have a one-year contract to import around 2.2 million tonnes of LPG from the US for 2026, representing nearly 10 per cent of India's annual LPG imports.

Indian companies have also finalised LPG supplies with several global energy companies with diversified portfolios, which are expected to arrive by mid-March, said another government official.

The government is also exploring alternative sources for liquefied natural gas (LNG) supplies, including the US, Canada, Algeria, Australia and Norway, the official said.

Oil Price Impact on Inflation

The spike in crude prices has raised concerns over its impact on India's oil import bill, domestic fuel prices and overall inflation in the economy, apart from the wider current account deficit (CAD).

Experts estimate India could face a sharp increase in its crude oil import bill if elevated prices persist.

Assuming global crude averages $110 to $115 per barrel in FY27, the country's net oil import bill could rise by $56 billion to $64 billion annually.

"Each $10 per barrel increase in the average crude oil price results in a $14 billion to $6 billion increase in net oil imports," said ICRA Chief Economist Aditi Nayar.

"If the oil price moves to an average of $110 to $115 per barrel in FY27, then the increase in net oil imports would be to the tune of $56 billion to $64 billion," Nayar explained.

She added that every $10 per barrel increase in average crude prices could widen the CAD by 30 to 40 basis points, while raising wholesale price index (WPI) inflation by 80 to 100 basis points and consumer price index (CPI) inflation by 40 to 60 basis points, assuming a full pass-through into retail fuel prices.

"Overall, a sustained increase in crude oil prices could pose significant upside risks to ICRA's FY27 WPI inflation forecast of 2.7 per cent, and to a smaller extent to the CPI inflation projection of 4.0 per cent, depending on the extent of pass-through to the retail prices on fuel items," Nayar said, adding that higher fuel prices would also raise transportation costs, creating a "second-round" impact by pushing up the prices of goods and services.

India imported 243 million tonnes (mt) of crude oil in 2024-25 for $137 billion.

In the current financial year, the country imported 206 mt worth $100 billion between April 2025 and January 2026.

Before the Iran war began in late February, India imported 21 mt of crude in January alone at a cost of $9.5 billion, when Brent averaged $66 per barrel.

India imports more than 85 per cent of its crude oil needs, making global oil prices one of the largest external macroeconomic risks for the economy.

According to DSP Mutual Fund, if crude prices were to climb to $120 per barrel, India's oil trade deficit could expand to $220 billion, pushing the current account deficit beyond 3 per cent of GDP and potentially weakening the rupee.

Meanwhile, US Energy Secretary Chris Wright said in an interview that the United States has urged India to buy Russian oil already floating at sea and redirect it to Indian refineries to help 'tamp down' fears of supply shortages and price spikes amid the ongoing West Asia conflict.

Feature Presentation: Ashish Narsale/Rediff