ATF, commercial LPG prices cut as global crude cost eases

India’s average import price for crude oil has dropped below $70 per barrel for the first time since the start of the Western Asia conflict, marking a significant shift in the nation’s energy market dynamics. However, this downward trend in oil costs does not immediately translate into lower prices for consumers at the pump, as state-run oil marketing companies (OMCs) aim to recover earlier financial losses and the government seeks to recoup some of its fiscal expenditures aimed at protecting consumers.

The decline in the Indian basket of crude oil prices reflects a dramatic reversal from the height of the crisis. On February 28, when the conflict erupted, the price of the Indian basket soared to $157.04 per barrel, creating immense financial strain on OMCs. By June 26, the price had plummeted to $68.86 per barrel—a decrease of over 56%. This drop has alleviated some of the pressure on OMCs, which had previously operated under substantial losses due to the unchanging retail fuel prices amid soaring global prices. Currently, these state-owned fuel retailers are reporting marketing margins of approximately ₹5–6 per litre for petrol, though they still incur losses of about ₹8–10 per litre on diesel sales.

India relies heavily on imported crude oil, accounting for over 88% of its total consumption. During the conflict, the surge in global oil prices led to massive losses for OMCs, as retail prices remained stagnant. In response, the government introduced a temporary excise duty reduction of ₹10 per litre on both petrol and diesel on March 27. This measure helped mitigate some of the financial burden, reducing the loss on petrol to ₹26 per litre and on diesel to ₹81.90 per litre. However, as the conflict escalated and the critical Strait of Hormuz—through which roughly one-fifth of the world’s oil trade passes—was temporarily blocked, international crude prices rose once more, leading to renewed losses for OMCs.

In an effort to address these ongoing challenges, OMCs raised petrol and diesel prices by a combined ₹7.35 and ₹7.53 per litre between May 15 and May 25. The situation began to stabilize following signs of potential diplomatic resolution, particularly with the emergence of a U.S.-Iran peace agreement and the signing of a memorandum of understanding in mid-June. As oil shipments through the Strait of Hormuz resumed, global crude prices eased, improving India’s energy security and contributing to the recent decline in import costs.

The Indian basket of crude oil prices, which had reached $100 per barrel in early March and remained above that threshold until May, dipped below $80 by mid-June before settling at $68.86 per barrel. Petroleum Minister Hardeep Singh Puri emphasized the government’s role in safeguarding consumer interests, stating that India had managed to avoid widespread fuel rationing despite the supply disruptions. He highlighted the country’s diversified crude sourcing strategies, enhanced import infrastructure, and investments in pipelines and storage facilities as key factors enabling this resilience.

Government officials estimate that the fiscal cost of shielding consumers from the global energy shock has amounted to approximately ₹1.23 lakh crore. Additionally, the monthly revenue loss due to the excise duty cuts is estimated at nearly ₹14,000 crore. Despite these financial implications, Puri reiterated that India had successfully navigated the crisis without experiencing fuel shortages, maintaining uninterrupted supplies even during the most challenging periods of the conflict.