Petrol, diesel prices: hike risk as crude spikes in 2026

What triggered fresh talk of a fuel price hike

Government sources told PTI on Friday that a hike in petrol and diesel prices in the near future cannot be ruled out. The indication comes at a time when retail fuel prices have remained unchanged since early April 2022, even as global crude benchmarks have moved sharply higher. The latest chatter has resurfaced after crude surged to a four-year high of $126 per barrel earlier this week, before easing modestly. Despite the pullback, international crude remained above $110 per barrel, keeping pressure on India’s fuel retailers.

The immediate driver cited in the reports is the rise in input costs linked to restricted ship movements through the Strait of Hormuz and continued tensions between the United States and Iran. With India heavily dependent on imported oil, higher crude prices directly widen the gap between what refiners pay and what consumers pay at the pump. That gap is also the core of the debate around whether the four-year freeze can continue without policy changes.

What the government and oil companies have said so far

While PTI cited government sources leaving the door open to a price increase, the public messaging from the petroleum ministry has repeatedly been that there is no proposal under consideration. The Ministry of Petroleum and Natural Gas (MoPNG) has posted on X that “there is no such proposal under consideration by the government,” calling reports of an imminent hike “mischievous and misleading.”

At a separate briefing, MoPNG Joint Secretary Sujata Sharma said the government had seen panic buying in some places and that it was in continuous contact with state governments. She also said retail outlets were being monitored and supplies prioritised to ensure availability and avoid “dry-outs.” The clarification came amid rumours of an immediate post-election hike, which contributed to queues at petrol pumps in parts of the country, including Andhra Pradesh.

IOC’s industry view and where price increases have already happened

Indian Oil Corporation (IOC), speaking on behalf of the industry, said petrol, diesel and domestic LPG prices have not been raised despite the surge in global energy costs. The statement aligns with the visible reality at retail outlets: pump prices have stayed frozen since early April 2022.

But state-run oil firms have increased prices in other fuel categories. Reports said commercial LPG, industrial diesel, 5-kg LPG cylinders and jet fuel supplied to international airlines have been hiked in line with rising input costs. This split approach underscores that while household and retail transport fuels have been politically and economically sensitive, other segments are being repriced to reflect costs.

The key numbers behind oil company losses

A senior oil ministry official told a news briefing last week that state-owned fuel retailers are incurring under-recoveries of about Rs 20 per litre on petrol and roughly Rs 100 per litre on diesel. These figures were cited as the cost of holding pump prices steady while crude remains elevated.

Crude averaged about $10 per barrel last year but has averaged over $113-$114 this month, according to the reports. The persistence of higher crude levels, rather than just a brief spike, is what increases the strain on oil marketing companies when retail prices are not adjusted.

Election-linked speculation and the Rs 25-28 per litre estimate

Analysts and reports linked to Kotak Institutional Equities have flagged the possibility that petrol and diesel prices may need to rise by Rs 25-28 per litre if crude stays near $120 per barrel. The estimate was discussed in the context of assembly elections, with polling in West Bengal ending on April 29.

The government has denied that any such proposal is under consideration. Even so, PTI’s Friday report said the possibility of an increase remains open, indicating a divergence between private discussions and public denials. Separately, Kotak estimated that the gap between crude costs and frozen retail prices translates into incremental losses of about Rs 270 billion per month, which is Rs 27,000 crore.

West Asia tensions and the Strait of Hormuz factor

Global crude prices have climbed sharply over the past two months, rising more than 50% amid tensions in West Asia. Reports cited US and Israeli strikes on Iran on February 28 and Tehran’s retaliation as key events that disrupted movement through the Strait of Hormuz. The Strait is a critical route that handles nearly a fifth of global oil trade, making any restriction a direct risk to supply and freight costs.

In this backdrop, crude spikes have been frequent, followed by partial corrections. Brent has been cited in the $103-106 per barrel range in some reports, while others referenced crude holding above $110 after the $126 peak. The central point remains unchanged: global prices are materially higher than last year.

Current pump prices and what is frozen

Retail petrol and diesel prices have been unchanged since early April 2022. In Delhi, petrol is currently priced at Rs 94.77 per litre and diesel at Rs 87.67 per litre, as reported by PTI and other outlets. The freeze has held through months when crude fell and months when crude rose.

Officials have said that when oil prices fell, state-run firms earned profits that helped offset losses when prices rose. But with crude sustaining above $110 in recent weeks, the mismatch is reported to have widened sharply.

Key facts at a glance

Market impact: pricing signals, supply monitoring, and consumer behaviour

The immediate market impact has been visible more in consumer behaviour than in announced pump price changes. The government acknowledged panic buying in some pockets and said it was coordinating with state administrations. Monitoring of retail outlets and prioritisation of supply were cited as steps to avoid localised shortages.

For oil marketing companies, the reported under-recoveries of Rs 20 per litre on petrol and Rs 100 per litre on diesel indicate sustained financial stress if crude remains elevated. At the policy level, the government has highlighted interventions such as a cut in excise duty by Rs 10 per litre on petrol and diesel and the reintroduction of windfall or export-related levies to influence domestic availability. These measures were described in reports as partial relief, not a structural fix, especially if high crude persists.

Why this story matters for investors and policy watchers

For equity investors tracking state-run oil marketing companies and downstream firms, the core issue is the gap between global input costs and administered retail prices. A prolonged freeze can compress marketing margins and increase working-capital needs, particularly when crude remains high for weeks rather than days.

For macro and policy watchers, the story sits at the intersection of inflation management, fiscal measures (including excise duty changes), and energy security risks linked to the Strait of Hormuz. The government’s repeated denial of an immediate hike coexists with PTI’s sourcing that a hike cannot be ruled out, keeping uncertainty elevated for both consumers and markets.

Conclusion

Reports on Friday said government sources do not rule out a petrol and diesel price hike in the near future as crude remains elevated and retailer losses mount. At the same time, the petroleum ministry has continued to state there is no proposal under consideration and has pointed to supply monitoring amid panic buying in some regions. The next signals for markets are likely to come from official pricing actions, any further changes in West Asia-driven crude volatility, and future ministry statements on the retail price freeze that has been in place since early April 2022.