New Delhi: Government sources indicated on Friday that a hike in petrol and diesel prices in the near future cannot be ruled out, as state-owned oil companies continue to suffer mounting losses from a four-year freeze in retail rates despite a sharp rise in global crude oil prices.
Global Crude Oil Prices Surge
International crude oil prices climbed to a four-year high of USD 126 per barrel this week before cooling slightly, but remained above USD 110 per barrel. This surge is attributed to restricted ship transits through the Strait of Hormuz and escalating tensions between the US and Iran amid stalled peace talks. The Strait of Hormuz, a critical energy artery, handles roughly a fifth of global oil trade and significant volumes of liquefied natural gas.
Government Sources on Price Hike
Government sources confirmed that the possibility of a petrol and diesel price increase in the near future is not ruled out. Earlier in the day, Indian Oil Corporation (IOC), speaking on behalf of the industry, stated that petrol, diesel, and domestic LPG rates are not being increased despite the surge in international energy costs. However, state-owned oil firms have hiked prices of commercial LPG, industrial diesel, 5-kg LPG, and jet fuel sold to international airlines in line with the rising costs.
Analyst Predictions and Historical Context
Analysts had earlier flagged the possibility of price increases of Rs 25-28 per litre after the end of polling for assembly elections in West Bengal on April 29. The spike in international oil prices followed the US and Israel's attack on Iran on February 28, and Tehran's sweeping retaliation that effectively shut the Strait of Hormuz.
Losses Incurred by State-Owned Fuel Retailers
Last week, a senior oil ministry official disclosed that state-owned fuel retailers were incurring losses of about Rs 20 per litre on petrol and roughly Rs 100 per litre on diesel. These losses stem from pump prices remaining frozen for nearly four years despite a surge in global oil prices. The official had stated that there was no plan to increase prices at that time.
Crude Oil Price Trends
Crude oil, which was priced at USD 70 per barrel last year, has averaged over USD 114 per barrel this month. Retail petrol and diesel prices have remained unchanged since early April 2022. During this period, oil prices fluctuated; when they fell, state-owned oil firms made handsome profits, which they used to offset losses when rates rose.
Current Fuel Prices in Delhi
Currently, petrol is priced at Rs 94.77 per litre in Delhi, while diesel costs Rs 87.67 per litre.
