Petrol at ₹100 and beyond: Four hikes in a fortnight, and more possibly on the way- The Week

Ten days ago, on May 15, when India saw its first fuel hike in 49 months, we postulated that it was just the beginning. You can read that article here. Fast forward to now, and filling fuel in your vehicle just got way more expensive!

State-owned fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL), which together control 90 per cent of India’s fuel market, raised petrol prices by ₹2.61 per litre and diesel by ₹2.71 per litre on Monday, the fourth such increase in less than two weeks and the clearest signal yet that the cost of the Iran war is being passed directly to Indian consumers.

Petrol in Delhi now costs ₹102.12 per litre, the first time in four years it has crossed the ₹100 mark in the capital, while diesel stands at ₹95.20.

In Mumbai, petrol costs ₹111.21 a litre and diesel ₹97.83. Kolkata is at ₹113.51 and ₹99.82, and Chennai at ₹107.77 and ₹99.55.

The four rounds of hikes since the ides of May have pushed the cumulative price increase to roughly ₹7.5 per litre each for petrol and diesel, the steepest run-up since fuel prices were frozen in April 2022. The immediate trigger is the Strait of Hormuz disruption. Brent crude surged from about $72.87 a barrel on 27 February to nearly $120 in March after US-Israeli strikes on Iran, before easing to around $97 on Monday’s peace-deal optimism.

India, the world’s third-largest oil importer, sources over 85 per cent of its crude needs from abroad, making it acutely exposed to any choke-point disruption.

Fuel prices had been held artificially low for the first two-and-a-half months of the conflict, with state retailers absorbing mounting under-recoveries.

Monday’s revision came 10 days after the BJP won three of five state elections, including West Bengal, with analysts arguing that politics had delayed an unavoidable correction.

But are we done with the hikes? More pain could be on the way. Industry executives and energy analysts say state retailers have yet to fully recover past under-recoveries accumulated during the price freeze, in addition to current revenue losses. We pointed out earlier how analysts at Kotak Institutional Equities estimated the required correction for fuel at ₹25–28 per litre to recover losses.

IOC data for May 1–22 showed retail diesel sales had risen 18 per cent from a year earlier and petrol by 14 per cent. So, despite the hikes, demand increased. Private retailers also hiked fuel prices in tandem: Nayara Energy matched every PSU hike, while Shell had already raised petrol by ₹7.41 a litre and diesel by as much as ₹25 per litre from April 1.