Petrol, diesel prices stay high: what 2026 margins show

Why fuel prices are not tracking crude

Crude prices fell sharply after a ceasefire deal last month and have risen only modestly during bursts of renewed fighting since. But retail fuel prices have stayed elevated, highlighting a gap between headline crude moves and what consumers pay at the pump. One reason is that refining and product-market dynamics, not just crude, are driving costs. Another is the time lag between when crude is purchased, refined, and finally sold as petrol and diesel.

In India, Union petroleum minister Hardeep Singh Puri indicated that pump prices are unlikely to come down for the next two to three months. He said oil marketing companies are currently selling fuel produced from petroleum stock procured two months ago, when crude oil prices were elevated during the peak of the West Asia crisis. That inventory cycle matters because pump prices often reflect earlier input costs rather than today’s spot crude.

Global trigger: refining margins surged, not just crude

Refining margins for diesel and gasoline have moved sharply higher in key markets, tightening the economics of fuel supply even when crude cools. European diesel refining margins hit a record high of over $10 a barrel on Wednesday after Russia announced a diesel export ban. In gasoline, Europe traded at a premium of about $11 a barrel to crude this week, the highest since summer 2022 during peak disruption from the Russia-Ukraine war.

Asian diesel margins have risen to around a one-month high as traders anticipate tighter supplies in Western markets, even though Asia remains relatively well supplied. Gasoline profit margins have also climbed to fresh highs as the Northern Hemisphere enters its peak summer driving season. Together, these signals point to a product-market squeeze that can keep retail prices sticky even after crude eases.

India: minister signals limited near-term relief

Puri said fuel prices could be reviewed if crude oil prices remain low over the coming weeks, including the scenario of prices coming down to $10 a barrel or below. But he also noted that such lower-priced crude would “arrive here much later,” indicating that any benefit would be delayed. Responding to questions on when pump prices may fall further, he said it would not be appropriate to speculate.

On current retail levels, petrol in Delhi is priced at around ₹102 per litre, while in Calcutta it retails at ₹113.51 per litre. Prices vary across states due to local taxes, and recent changes have not been uniform across India.

OMC losses, under-recoveries and the policy trade-off

Puri said oil marketing firms suffered losses of ₹74,781 crore from selling petrol, diesel and LPG below cost for the period up to June 30. The scale of under-recoveries frames why even modest pump-price hikes have been politically and economically sensitive.

In another reference to the stress on retailers, an oil ministry official, Sujata Sharma, said in April that post-war oil prices had caused Indian retailers to incur losses of roughly ₹100 per litre on diesel and about ₹20 per litre on petrol. Market participants also indicated that a modest increase in retail fuel prices may be needed to offset losses, with one report pointing to estimated losses of ₹1,000 crore a day (₹10 billion) on fuel sales.

Recent pump-price revisions and what changed

India’s state-run fuel retailers raised gasoline and diesel prices for the fourth time in 10 days, lifting petrol in Delhi to ₹102.12 per litre and diesel to ₹95.20 per litre. Those cumulative gains of 7.8% and 8.6%, respectively, put both fuels at their highest level since May 2022. The same set of companies, Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp., together control about 90% of India’s fuel retail market.

Before this run of increases, state refiners raised gasoline and diesel prices by ₹3 per litre on May 15, described by analysts as the first increase in four years. On May 19, state refiners raised gasoline and diesel prices by another 90 paise per litre, marking the second increase in less than a week.

Table: Key figures cited across markets and India

Broker view: margins improve, but risks remain

A JP Morgan report said profitability at state-run oil marketing companies is set to improve as falling crude oil prices lift fuel marketing margins. It added that rising debt levels and uncertainty over fuel taxes could limit the sector’s longer-term earnings outlook.

The report said composite margins on petrol and diesel sales at state-run refiners and fuel retailers are now above levels seen before the recent Middle East conflict, helped by lower crude prices and reduced central excise duties. It estimated that current composite petrol and diesel margins for BPCL and IOCL are higher than pre-conflict levels, while HPCL’s margins have largely returned to or exceeded levels seen before the recent oil price spike. JP Morgan also said a stronger margin environment could support earnings from the second quarter onwards, particularly if crude prices remain below $10 per barrel and refining margins stay elevated.

2026 outlook from global banks: tight supply keeps margins high

Goldman Sachs forecast that tighter petroleum product supply resulting from the Strait of Hormuz crisis will keep refining margins significantly higher throughout 2026, with diesel margins especially elevated. The bank said the war in the Middle East pushed refiners’ margins two to three times higher than the 2013-2019 average.

Diesel margins were cited as being between $19 and $16 per barrel higher than they were before March. Goldman’s analysts see diesel margins in Europe at $17 per barrel in the fourth quarter, with the margin for U.S. refiners even higher at $10 per barrel. Gasoline margins were projected to average $14 per barrel in Europe and $12 per barrel in the United States.

Market impact: inflation risk, industry pricing and demand signals

Repeated increases in retail fuel prices risk adding to inflationary pressures, even when hikes are described as modest. One estimate cited by Madhavi Arora, chief economist at Emkay Financial Services, put the immediate impact of higher fuel prices on consumer price inflation at around 15 basis points, while flagging that the broader indirect impact could be more significant.

Analysts and refining sources said earlier that the initial hike was small relative to the crude price surge and was unlikely to dent oil product demand. Economists Sonal Varma and Aurodeep Nandi of Nomura said the recent increases would cover only about one-tenth of under-recoveries faced by refiners. Separately, state refiners were also reported to be selling diesel to industrial buyers at premiums of at least ₹40 per litre over the retail pump price, indicating stronger realizations outside the retail channel.

Analysis: why the pump-price story remains sticky

Three forces in the material provided help explain why pump prices can stay elevated even after crude falls. First is the inventory lag that the minister pointed to: fuel being sold now may reflect crude bought two months earlier during a price spike. Second is the sharp rise in refining margins and product premiums, particularly in diesel, which can keep wholesale costs high even if crude cools.

Third is the balancing act between retailer finances, debt, and tax uncertainty. Loss figures cited for selling fuels below cost and commentary on under-recoveries show the sensitivity around pricing decisions. When crude rises quickly, the gap between retail prices and costs can widen, but passing through the full increase can amplify inflation risk. The outcome is often incremental adjustments, especially when global risks such as shipping premia and export bans keep product markets tight.

Conclusion: what to watch next

Fuel prices are unlikely to fall quickly if product markets remain tight and if the supply chain continues to reflect earlier, higher-priced crude. Puri’s comments suggest any review would depend on crude staying low for weeks, with the benefit reaching India later due to shipment and processing timelines.

Investors will track two near-term signposts highlighted in the reports: whether crude stays below $10 per barrel as referenced by JP Morgan, and whether elevated refining margins persist into 2026 as Goldman Sachs forecast. Further pump-price revisions, if any, will also be shaped by state taxes and the pace at which under-recoveries narrow.