NEW DELHI: Crude oil prices crossing the $100 per barrel mark is tantamount to a mid-flight disruption to the global economy. Business as usual should be suspended, and a prolonged phase could result in serious damage. For a country like India, which is highly dependent on oil imports, the price of crude oil crossing $100 per barrel today is not the same as when it breached this threshold earlier. To be sure, this applies to all countries to some extent, and nominal crude oil prices, even in dollar terms, follow a different path compared to the real dollar. HT showed this in the chart on March 10.
However, for a country like India, the dynamics are largely different due to the exchange rate dynamics at play. Crude oil is almost always paid for in dollars, unless trading with a country like Iran or Russia that faces U.S. economic sanctions. This means that the actual prices of the Indian economy, in rupee terms, could be significantly different. Long-term analysis of the data shows this clearly.
Crude oil in March 2026 and March 2022 are not much different in dollar terms, however $ The price is very different
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CMIE provides monthly and daily data for the price of crude oil in dollars. Brent crude oil was priced at $117.2 per barrel in March 2022. This is an important milestone because the Russo-Ukrainian war began in February 2022. Brent crude oil was priced at $118.4 per barrel on March 20, 2026. This is a difference of only about 1% from the period immediately following the Ukrainian war. However, the price in Indian rupees in these two periods differs by a much larger amount. This is due to the movement in the INR-USD exchange rate. This was the number $76.24 per US dollar in March 2022, resulting in a price $8,935.3 per barrel for Brent crude. With the INR-USD exchange rate falling to $93.35 per US dollar On March 20, 2026, the local currency price for Brent crude $11,052.64 per barrel; A difference of 23.6%. These differences can also be seen in historical data. (See chart 1)
This also means that conveying retail fuel prices looks different when compared to crude oil prices in US dollars or $ conditions
Crude oil prices are important for government financing and refining margins. For the retail economy, what matters are things like petrol and diesel prices. How did the two move in India? The picture looks completely different if we compare the retail price of petrol (in Delhi) with the prices of crude oil in US dollars and Indian rupees. The former shows that retail prices did not fall as much as crude oil prices until the outbreak of the current war, while the latter shows that although crude oil prices fell, retail prices were still proportionately lower because they did not rise. (See chart 2a, 2b)
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The current government’s countercyclical fuel price policy underscores the limits of price liberalization in India
Gasoline and diesel prices were officially liberalized in 2010 and 2014.
In 2017, the government allowed daily price reviews. However, the situation changed when prices collapsed during the Covid-19 pandemic and have remained largely low except for a brief spike during the initial phase of the Ukraine war. Retail prices have remained mostly flat since a few months after the start of the Ukrainian war in 2022.
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The government clearly made a financial windfall through this arrangement when prices were lower. It is not surprising that it has now been forced to take a financial hit through a reduction in customs duties on petrol and diesel while crude oil prices have risen, and the depreciation of the rupee against the dollar has exacerbated this pain. One can criticize or praise the government depending on one’s point of view. The biggest lesson we have to learn is that fuel prices are too sensitive to be left completely free in an economy like India for reasons of fiscal prudence and political anger over inflation.
