There are no plans to increase retail prices of petrol and diesel for the time being despite international crude oil prices surging to over $100 per barrel—the highest level in over three-and-half years—due to the ongoing West Asia conflict, according to top government sources. This is in line with the government’s policy of the past few years to keep pump prices stable notwithstanding the volatility in international energy markets, they said. The fuel retail market in India is dominated by government-owned refiners and fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL), which together have a market share of 90%-plus.
A continued freeze in pump prices is expected to blunt the inflationary impact of the oil price spurt. Petrol and diesel prices have effectively been flat since April 2022, with the public sector oil retailers taking losses when global prices jump, and recouping them when they fall. “The OMCs have done well financially over the past few years and they are in a comfortable position to take some temporary pain to protect the Indian consumer from high energy prices…Is the price of petrol or diesel at the retail outlet going to rise in the foreseeable future? It is unlikely to happen,” said a senior government official.
The official, who spoke on the condition of anonymity, reiterated that there are sufficient stocks of crude oil, petrol, and diesel in the country for the time being, and there is no cause for panic. Last Tuesday, government sources had indicated that India had six-eight weeks of crude and fuel stocks, which would be replenished on an ongoing basis with supplies from other regions being increased. As refineries continue to process crude, produce fuels, and get more oil from regions other than West Asia, these stocks will keep shifting, and the effective coverage would be extended, they had said.
As for cooking gas, or LPG, whose stocks are relatively lower than oil, petrol, and diesel, and alternative suppliers are in faraway geographies like North America, the government is taking measures to ensure uninterrupted supplies to households, they said. The minimum waiting period for booking a domestic LPG cylinder refill increased from 21 days to 25 days to prevent hoarding and creation of artificial scarcity in the market, according to sources. They said that going by LPG consumption rates by households, they require a cooking gas cylinder every six weeks or so, and the 25-day booking limit should be a comfortable one.
The government invoked emergency powers derived from the Essential Commodities Act to direct Indian refiners to maximise LPG production and ensure that all the gas is supplied solely to domestic LPG consumers and not used to produce petrochemicals. Moreover, LPG supply to households is being prioritised by refiners over supplies to commercial users of the fuel, which could lead to tightness in commercial LPG supplies in certain pockets, industry sources indicated.
There have been some reports of gas shortage hitting commercial and industrial users from various parts of the country. For instance, the Bangalore Hotels Association has said that supply of commercial LPG cylinders have stopped, which would result in its members shutting shop on Tuesday. A number of ceramic units in Gujarat’s Morbi have also reportedly become non-operational due to inadequate availability of propane—a constituent of LPG—and liquefied natural gas (LNG), both of which they consume.
As the conflict in West Asia rages, crude oil prices jumped 30% early Monday to nearly $120 per barrel, levels that had not been seen since mid-2022. Prices retreated, but still traded above $100 per barrel, after reports indicated that the G7 countries will be discussing a coordinated release of around 400 million barrels of crude oil from their strategic petroleum reserves to improve the supply situation. At 7:15 pm India time, benchmark Brent crude was still up over 10% at around $102 per barrel.
Story continues below this ad
The conflict, which began on February 28 and currently doesn’t seem to have an end in sight, has led to growing concerns of an extended supply disruption due to the effective suspension of tanker movements through the critical chokepoint of the Strait of Hormuz, and major Gulf oil producers cutting oil production as they run out of storage. Moreover, intensifying attacks of oil infrastructure in the region over the weekend, and Iran’s appointment of Mojtaba Khamenei—son of the late Ayatollah Ali Khamenei—as Iran’s new supreme leader have also contributed to the surge in prices. Mojtaba Khamenei’s appointment has signaled continuity in Iran’s leadership; regime change was a key objective of the US-Israel attack on Iran.
The Strait of Hormuz—the narrow waterway between Iran and Oman that connects the Persian Gulf with the Gulf of Oman and the Arabian Sea—handles approximately one-fifth of global liquid petroleum consumption and global liquefied natural gas (LNG) trade. Around 15 million barrels of crude pass through the Strait every day. Around 2.5–2.7 million barrels per day (bpd) of India’s crude imports—accounting for around half of the country’s total oil imports—have transited the Strait of Hormuz in recent months; the longer-term average is around 40%. This oil is mainly from Iraq, Saudi Arabia, the UAE, and Kuwait. In the case of LPG, over 80% of India’s imports pass through the Strait.
Sources indicated that the government and Indian oil and gas companies are in touch with all international suppliers, including national oil companies and even large traders like Vitol, Trafigura, and ADNOC Trading, to source additional volumes of crude oil and LPG from their international portfolios, even as the country is in a “comfortable” position to prevent any near-term shortage of major fuels. A senior refining sector official said that the current priority is to ensure a steady flow of oil, regardless of the price.
Indian refiners are ramping up oil purchases from regions other than West Asia, which account for 60% of the country’s oil imports. India’s stocks of crude oil and major fuels derived from it—like diesel and petrol—are increasing as oil cargoes from other regions, including Russian crude already in tankers on water, are coming in, according to sources in the government.
.