Petrol, diesel price hike likely soon as global crude surges

Government sources indicated petrol and diesel price hikes may be imminent as global crude surges and losses mount for oil firms, despite a four-year retail price freeze, with rising tensions in West Asia and restricted Strait of Hormuz supply driving costs higher

New Delhi: An increase in petrol and diesel prices in the near future is not ruled out, government sources said on Friday, as losses mount from a four-year-old freeze in retail rates despite the sharp rise in global crude oil prices.

International crude oil prices this week climbed to a four-year high of USD 126 per barrel before cooling down slightly, but remained above USD 110 per barrel as ship transits through the Strait of Hormuz remained restricted and US and Iranian leaders traded barbs amid stalled peace talks. Government sources said the possibility of a petrol and diesel price hike in the near future is not ruled out.

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Earlier in the day, Indian Oil Corporation (IOC), making a statement on behalf of the industry, said petrol and diesel price as also domestic LPG rates are not being increased despite a surge in international energy cost.

State-owned oil firms hiked prices of commercial LPG, industrial diesel, 5-kg LPG and jet fuel sold to international airlines in keeping with the cost. Analysts had earlier flagged the possibility of price increases of Rs 25-28 per litre after the end of polling for assembly elections in West Bengal on April 29.

International oil prices spiked after the US and Israel attacked Iran on February 28, and Tehran’s sweeping retaliation that effectively shut the Strait of Hormuz — one of the world’s most critical energy arteries, linking the Persian Gulf to global markets and handling roughly a fifth of global oil trade along with significant volumes of liquefied natural gas.

Last week, a senior oil ministry official told a news briefing that state-owned fuel retailers were incurring losses of about Rs 20 per litre on petrol and roughly Rs 100 per litre on diesel as pump prices remained frozen for nearly four years despite a surge in global oil prices. Yet there is no plan to increase prices, she had said. Crude, which was USD 70 per barrel last year, averaged over USD 114 this month.

Retail petrol and diesel prices have remained frozen since early April 2022 — a period during which oil prices rose in some months and fell in other times. When prices fell, state-owned oil firms made handsome profits, which they used to set off losses when rates rose. Petrol is currently priced at Rs 94.77 a litre in Delhi, and diesel comes for Rs 87.67.