India Raises Fuel Prices for the Fourth Time This Month, with a Cumulative Increase of Nearly 9%

Influenced by the surge in fuel consumption during the agricultural harvest season, the widening price gap between state-owned and private gas stations, and other factors, India's state-owned fuel retailers increased the prices of gasoline and diesel again on the 25th, marking the fourth price adjustment of the month.

Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation, the three major state-owned retailers, collectively account for about 90% of India's fuel retail market. According to announcements and official website data from each company, the price of gasoline in New Delhi was increased by 2.6% to 102.12 rupees per liter (approximately 1.07 USD), and the price of diesel was increased by 2.9% to 95.20 rupees per liter. Due to varying tax rates across states, the extent of price adjustments varies across the country.

After four rounds of price adjustments this month, the cumulative increase in gasoline prices has reached 7.8%, and the cumulative increase in diesel prices has reached 8.6%, both rising to the highest level since May 2022.

The Four-Year Price Freeze Policy is Unustainable

Although India liberalized fuel retail pricing many years ago, the Modi government actually froze end prices for nearly four years. However, the Iran war has driven international crude oil prices up significantly, coupled with the continuous depreciation of the rupee against the US dollar, and the losses of state-owned refiners have deepened, making this policy increasingly difficult to sustain. This round of price adjustments began on May 15.

Even after the latest round of increases, the selling prices of state-owned retailers are still below the market level. Private operators such as Shell have gasoline prices exceeding 116 rupees per liter and diesel exceeding 127 rupees per liter at gas stations across India.

Local Supply Shortages

At the same time, state-owned enterprises add a markup of at least 40 rupees per liter when selling diesel to bulk users, prompting commercial buyers and car owners to shift to subsidized retail gas stations. This sudden increase in demand has led to supply shortages in many gas stations, and concerns about supply shortfalls are rising.

Data disclosed by Indian Oil Corporation on Saturday shows that the sales volume of diesel at its retail outlets increased by 18% year-on-year in the first 22 days of May, and gasoline sales volume increased by 14% year-on-year.

The Continuing Impact of Middle East Conflicts

Due to its heavy dependence on crude oil and refined products transported through the Strait of Hormuz—a key waterway that has been effectively blocked since the outbreak of war in February—India has become one of the economies most severely impacted by Middle East conflicts.

This month, the Indian government has introduced a series of measures to curb the pressure of rising oil prices on the rupee exchange rate and the economic impact of foreign capital accelerating their exit from the country's stock market.