India's average crude oil import price has dropped below $70 per barrel for the first time since the outbreak of the West Asia conflict, offering relief to the country's energy import bill. However, despite the sharp decline in global crude prices, consumers are unlikely to see an immediate reduction in petrol and diesel prices, as state-run oil companies continue to recover past losses and the government weighs its fiscal position.

The average price of the Indian basket of crude oil declined to $68.86 per barrel on June 26, marking a significant fall of more than 56% from its peak of $157.04 per barrel recorded on March 23, when geopolitical tensions had pushed global oil prices to multi-year highs.

Why Petrol and Diesel Prices May Not Fall Yet

According to people familiar with the matter, the recent decline in crude oil prices has improved the financial position of India's state-owned oil marketing companies (OMCs). However, these companies are still balancing earlier losses incurred during the period of elevated crude prices.

Currently, the three major public sector fuel retailers are reportedly earning marketing margins of around ₹5–6 per litre on petrol, while they continue to incur losses of approximately ₹8–10 per litre on diesel sales.

Officials from Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL), and the Petroleum Ministry did not comment on the matter.

India Heavily Dependent on Crude Oil Imports

India imports more than 88% of the crude oil it consumes, making international oil prices a key factor in determining domestic fuel costs.

When global crude prices surged following the conflict in West Asia, retail fuel prices remained largely unchanged, resulting in substantial losses for oil marketing companies. To cushion the impact, the central government reduced excise duty by ₹10 per litre each on petrol and diesel on March 27.

Before the tax cut, OMCs were reportedly losing nearly ₹26 per litre on petrol and ₹81.90 per litre on diesel.

Conflict and Strait of Hormuz Disruptions Pushed Oil Prices Higher

As tensions escalated and the Strait of Hormuz, one of the world's most critical oil shipping routes, faced disruptions, international crude prices climbed further.

Despite the excise duty reduction, mounting losses forced state-owned fuel retailers to increase retail fuel prices between May 15 and May 25, raising petrol prices by ₹7.35 per litre and diesel prices by ₹7.53 per litre.

Global Oil Prices Ease as Supply Improves

International crude prices began softening after diplomatic efforts signaled progress toward easing tensions in West Asia. Prospects of a US-Iran peace agreement and a memorandum of understanding signed in mid-June helped restore confidence in global energy markets.

With oil shipments gradually resuming through the Strait of Hormuz, crude prices declined steadily.

The Indian crude basket, which was priced at $71.17 per barrel on February 27, crossed $100 per barrel in early March and remained above that level until May. It dropped below $80 per barrel by mid-June before falling to $68.86 per barrel by June 26.

Government Says Consumers Were Protected

Union Petroleum and Natural Gas Minister Hardeep Singh Puri said the government successfully protected Indian consumers from the global energy crisis despite severe supply disruptions.

According to sources, the Centre has incurred an estimated ₹1.23 lakh crore in fiscal costs to shield consumers, including revenue losses from the excise duty reduction. Government estimates suggest the excise duty cut alone reduced monthly revenues by nearly ₹14,000 crore.

The minister also highlighted that India's diversified crude sourcing strategy, expanded import infrastructure, and investments in oil pipelines and storage facilities enabled uninterrupted fuel supplies throughout the crisis.

He added that despite disruptions in the Strait of Hormuz, India avoided fuel shortages and widespread rationing experienced in several other countries, ensuring a stable supply of petrol and diesel across the nation.

(Inputs from agency.)