Why Petrol & Diesel Prices Keep Rising — And What Could Happen Next

Fuel prices have been hiked for the fourth time in two weeks, with petrol prices increasing by ₹2.61 per litre and diesel prices by ₹2.71 per litre. The mounting economic pressure from the West Asia crisis is further expected to challenge policymakers managing imports, inflation, growth, and fiscal math.

For households, budgeting and transport costs will be the immediate concern, with fuels ranging from petrol to cooking gas witnessing massive price hikes amid the global energy crisis.

“For nearly four years, petrol and diesel prices in India stayed frozen. The government quietly absorbed global oil shocks, cut excise duty by ₹3 a litre, and kept retail prices from moving,” Tushar Badjate, Director, Badjate Stocks and Shares Pvt Ltd, said. “This is not just a pump price story. It is a real move towards inflation.”

The latest revision in petrol prices has cumulatively raised rates by nearly ₹8 per litre, with cities such as Delhi seeing petrol breach the psychologically crucial ₹100-per-litre mark. Diesel prices are at ₹95.20 per litre, as per reports citing industry experts.

Fuel prices were first raised on May 15 by ₹3 per litre each, followed by another hike on May 19 with a 90-paise increase, and by 87 paise per litre for petrol and 91 paise for diesel on May 24.

Why Are Prices Being Hiked?

Since the onset of the West Asia crisis on February 28, global oil markets have been grappling with extreme volatility. India imports nearly 90% of its crude oil requirements, making it extremely vulnerable to global tensions and market swings.

“The recent ₹3 price increase underscores that energy self-reliance is now more critical than ever, highlighting why we must accelerate our shift away from global volatility,” Samir Somaiya, Chairman and Managing Director at Godavari Biorefineries Limited (GBL), said.

Following the combined US-Israel attack on Iran, Tehran shut down the Strait of Hormuz, through which nearly 20% of global energy trade passes. Following the shutdown, benchmark Brent crude repeatedly hit multi-year highs, with prices reaching as high as $126 per barrel.

The US had to lift some sanctions on Russian crude, and the International Energy Agency announced its largest-ever release of emergency stockpile reserves to prevent global crude prices from hitting $150 per barrel, which would enter recession territory.

Analysts have warned that even with an immediate resolution to the Iran-US war, global energy prices may remain elevated. If the war prolongs and the strait remains disrupted, it could significantly slow the global economy and even trigger a recession.

The soaring global fuel prices are weighing heavily on oil marketing companies (OMCs) and the government as they battle rising import costs, a falling rupee, shrinking profit margins, and fiscal pressures.

As per reports, OMCs, including state-run BPCL, IOCL, and HPCL, held prices steady for weeks and absorbed the price shocks, with combined losses estimated at nearly ₹1,000 crore a day.

The Invisible Tax

While petrol price hikes usually grab headlines, it is diesel prices that hurt the economy the most. Diesel powers trucks, buses, and commercial transport, which form the backbone of India’s supply chain.

Since over 70% of goods in India are transported by road, a rise in diesel prices quickly increases transportation costs across the country.

Fuel accounts for a major share of a truck operator’s expenses, so logistics companies often raise freight charges almost immediately when diesel prices go up.

This means businesses transporting vegetables, groceries, raw materials, and packaged products end up paying more to move goods from one place to another.

These higher transport costs are eventually passed on to consumers. As a result, everyday essentials such as vegetables, food items, milk, and household goods become more expensive within weeks.

Even people who do not own vehicles feel the impact, as rising diesel prices quietly push up the cost of living across the economy.

How Long Will the Hikes Last?

As per reports citing industry leaders and energy analysts, fuel prices may continue to witness hikes in the coming weeks. State-owned oil companies are still trying to recover revenue losses.

Though the daily losses have fallen substantially following the price hikes, they have not been fully recovered. As per a Reuters report, energy analysts believe a fifth increase is likely on the table unless Brent stabilises well below $100 per barrel for a sustained period.

How Are Policymakers Managing?

The Centre and the Reserve Bank of India have earlier cautioned that fuel prices could be raised amid rising global energy prices and geopolitical uncertainty. Petroleum Minister Hardeep Singh Puri said that “at some stage the government has to take a view” on petroleum pricing amid soaring global prices and supply disruptions.

RBI Governor Sanjay Malhotra earlier this month warned that India may soon be “forced” to raise retail fuel prices if the West Asia crisis continues.

Further, Prime Minister Narendra Modi urged citizens to conserve fuel, citing foreign exchange pressures, by adopting carpooling, shifting to public transport, and avoiding unnecessary travel expenditure.

How Are the OMCs Doing?

Debates have intensified around OMCs following the repeated price hikes, as the three state-owned companies — IOC, BPCL, and Hindustan Petroleum — reported strong profits. Together, the companies posted a net profit of over ₹77,000 crore in FY26, driven by stable crude prices and strong refining margins.

Company executives have warned that current retail prices do not fully reflect the surge in global oil and transportation costs, with government officials stating that the escalating situation in West Asia has pushed up freight rates, weighing on India’s import bill.