Will petrol and diesel prices rise after LPG hike amid global crude oil surge?
Surging global crude oil prices, rising domestic LPG rates, and ongoing geopolitical tensions have sparked concerns over a potential increase in fuel costs across India
The government’s decision to raise domestic LPG prices by Rs 60 has sparked fresh concerns about fuel inflation, with fears growing that petrol and diesel prices could also rise amid a sharp surge in global crude oil prices.
Global crude oil up 30% in a week
The conflict that erupted on February 28 between the United States-Israel coalition and Iran has now entered its second week and appears to be taking a dangerous turn.
Also read | Fuel, LPG crisis rumours due to Iran war spark panic buying in several states
As a result, crude oil prices saw a sharp rise on Friday and are now close to touching $100 per barrel. Brent crude prices surged to a high of $94.51 per barrel and are currently trading around $93. This has pushed up the cost of crude oil for government-run oil companies. In just one week, crude oil prices have risen by nearly 30%, raising the possibility of an increase in petrol and diesel prices.
Tracking petrol and diesel price trends
Looking at the history of petrol and diesel prices, before the Russia-Ukraine war began in February 2022, crude oil was trading at $91.77 per barrel. At that time in Delhi, petrol was priced at ₹95.51 per litre and diesel at ₹86.67 per litre. However, as the war escalated, crude oil prices surged to around $120 per barrel. Government oil companies subsequently increased petrol prices to ₹105.41 per litre and diesel prices to ₹96.67 per litre.
The rise in fuel prices triggered a sharp increase in inflation. Following this, the central government decided to cut excise duty on petrol and diesel. On May 21, 2022, the government reduced excise duty on petrol by ₹8 per litre and on diesel by ₹6 per litre, leading to a fall in retail fuel prices.
Crude oil fell 50%, but saw little relief
Although the Russia-Ukraine war continued, crude oil prices eventually declined sharply. At the same time, Russia began supplying crude oil to India at discounted rates. In 2024, ahead of the Lok Sabha elections, the Modi government reduced petrol and diesel prices by ₹2 per litre to woo voters. At that time, crude oil was priced at around $85 per barrel.
After that, prices in the international market continued to fall and dropped to around $60 per barrel. In other words, crude oil prices fell nearly 50% from their 2022 highs. However, petrol and diesel prices were reduced by only about 10%. This suggests that during this period the central government and state-owned oil companies did not pass on the full benefit of cheaper crude oil to consumers, instead retaining significant profits.
Govt collects ₹17 lakh crore in fuel duties
The central government currently collects taxes of about ₹21.90 per litre on petrol under various heads, including basic excise duty, special additional excise duty, additional excise duty and agriculture infrastructure cess. On diesel, taxes amount to around ₹17.80 per litre.
Over the past six financial years, the central government has collected a substantial amount in excise duties from petrol and diesel. Excise duty collections stood at ₹3,72,970 crore in 2020-21, followed by ₹3,63,305 crore in 2021-22. The revenue saw a gradual decline in the subsequent years, with ₹2,87,575 crore in 2022-23, ₹2,73,684 crore in 2023-24, and ₹2,71,529 crore in 2024-25. In 2025-26, collections dropped sharply to ₹1,30,092 crore. Altogether, the government amassed a total of ₹16,99,155 crore over this six-year period, highlighting the significant role of fuel taxes in bolstering government revenue.
Will petrol and diesel prices rise again?
The impact of rising crude oil prices can be illustrated this way: a $1-per-barrel increase adds roughly $2 billion — around ₹18,500 crore — to India’s annual import bill. With crude oil already up nearly 30% due to the ongoing conflict, the cost of imports could rise sharply.
Also read | Indian refiners buy Russian oil from tankers stranded at sea
India imports about 85-90% of its crude oil requirement, meaning that higher global prices will increase the cost of imports for oil companies. Since the US-Israel attacks on Iran, crude oil prices have continued to climb, raising concerns that petrol and diesel prices could rise again.
However, the government could provide relief to consumers by reducing taxes on petrol and diesel. The question remains whether it will choose to do so, or pass the burden on to the public.
(This article was originally published in The Federal Desh.)
