The average price of India’s crude oil imports fell below $70 a barrel for the first time since the conflict began in West Asia, but consumers are unlikely to see an immediate decline in gasoline and diesel prices as refiners seek to recoup their earlier losses, and the government may recover part of the financial cost of protecting consumers, people familiar with the matter said.
The average price of India’s crude oil basket fell to $68.86 a barrel on Friday, down more than 56% from a peak of $157.04 on March 23 after the conflict broke out on February 28. The decline eased pressure on state-run oil marketing companies (OMCs) that were incurring huge losses. According to the people cited above, the three state-owned fuel retailers now achieve marketing margins of approx $5-6 liters on gasoline, although they continue to lose $8-10 liters on diesel sales.
Indian Oil Corporation, Bharat Petroleum Corporation Limited, Hindustan Petroleum Corporation Limited and the Ministry of Oil did not respond to emailed queries.
India imports more than 88% of the crude oil it processes. As global oil prices rose during the conflict, oil marketing companies incurred losses because retail fuel prices remained largely unchanged. The government reduces customs duties on gasoline and diesel $10 liters each on March 27 to partially offset those losses after losses rose to $26 liters of gasoline and $81.90 liters on diesel.
As the conflict intensified and the Strait of Hormuz – a major transit route for about a fifth of global oil trade – was closed – international crude oil prices rose further. According to the above-mentioned people, losses widened again despite the reduction in customs duties, prompting operating oil companies to raise gasoline and diesel prices by a cumulative percentage. $7.35 f $7.53 per liter respectively between May 15 and 25.
Oil prices began to decline after the emergence of prospects for reaching a peace agreement between the United States and Iran and the signing of a memorandum of understanding in mid-June to chart a path towards ending the conflict. As energy shipments through the Strait of Hormuz gradually resume, global crude oil prices have declined, improving India’s energy supply situation, the people said.
The Indian basket, which stood at $71.17 a barrel on February 27, had crossed $100 in early March and remained above that level until May. The price fell below $80 by mid-June before falling to $68.86 per barrel on June 26, according to the latest available data.
Petroleum Minister Hardeep Singh Puri said on X that the government has protected Indian consumers from the global energy shock despite severe supply disruptions.
According to the above persons, the center has already incurred a financial cost of approx $1.23 lakh crore for consumer protection, including impact of duty reduction. The government estimates that the revenue lost due to excise tax cuts is approximately that $14,000 crores per month.
India’s diversified crude oil sources, expanded import infrastructure and strategic investments in pipelines and storage have enabled the country to weather the turmoil without fuel shortages, Puri said.
He added that India has maintained uninterrupted supplies despite the closure of the Strait of Hormuz and that consumers have been insulated from the full impact of the crisis. India has not witnessed the kind of fuel rationing that many other countries have witnessed.
