India's retail fuel prices to remain largely same amid Middle-East tension

Fuel prices globally are turning volatile as tensions in the Middle East begin to disrupt key oil supply routes and raise concerns about supply stability. One of the biggest worries is the slowdown in traffic through the Strait of Hormuz, a crucial maritime route responsible for transporting roughly a fifth of the world’s oil.

The situation intensified after the United States and Israel launched military action against Iran, prompting retaliatory attacks by Tehran on vessels moving through the chokepoint.

For India, the disruption is particularly significant because about 40 per cent of its crude imports pass through the Strait of Hormuz. With shipping risks increasing, the country has started securing alternative supplies, although these cargoes are being purchased at a premium.

Government says pump prices will not increase

Despite the rising cost of crude shipments, the government has indicated that retail fuel prices will not be raised. According to a government official who requested anonymity due to the sensitivity of the matter, the administration led by Narendra Modi aims to shield consumers from global oil price volatility.

Although fuel prices in India are officially deregulated, refiners have not revised retail rates since mid-March 2024. Oil marketing companies are considered financially strong enough to absorb losses on fuel sales, particularly because they previously held prices steady when crude costs declined.

No plan to release strategic oil reserves

The official also said the government is not considering releasing crude from strategic petroleum reserves at this stage. Commercial inventories remain adequate, and alternative cargoes have already begun arriving.

India’s emergency crude stockpiles are managed by the Indian Strategic Petroleum Reserve Ltd. The oil ministry informed Parliament that the reserves stood at around 30 million barrels last month, representing roughly 77 per cent of total storage capacity.

Global talks on oil reserves underway

Meanwhile, the Group of Seven are expected to discuss a possible coordinated release of oil reserves as disruptions in the Middle East continue to push prices higher. Any such step would likely be coordinated with the International Energy Agency.

India’s oil ministry has also discussed global stockpile levels with the IEA and OPEC, the official said. Authorities also clarified that there are currently no shortages of transport fuels or cooking gas. However, to discourage hoarding and moderate consumption, the waiting period for refilling liquefied petroleum gas cylinders has been extended from 21 days to 25 days.

(With inputs from Bloomberg)

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