Fuel prices surge in major cities as oil marketing companies recover losses from earlier volatility

State-run oil companies increased petrol and diesel prices across the country on Monday, marking the fourth hike in just 11 days. Petrol prices rose by up to ₹2.61 per litre and diesel by up to ₹2.71 per litre, pushing rates to fresh highs in several cities.

In the national capital, petrol now costs ₹102.12 per litre, breaching the ₹100-mark for the first time in four years. Diesel is priced at ₹95.20 per litre. In Mumbai, petrol has climbed to ₹111.21 per litre, reflecting the sharpest impact in metropolitan markets.

The latest revision has left consumers puzzled, especially as global Brent crude oil prices have eased below $100 per barrel after touching highs of $126 during recent geopolitical tensions.

Why prices are rising amid global decline

Experts point to a clear disconnect between international crude benchmarks and domestic retail prices. The primary reason, they say, is the need to recover substantial under-recoveries accumulated by oil marketing companies when global prices spiked.

Financial Expert explained that during the peak of the US-Iran conflict, Indian companies absorbed heavy losses to shield consumers from immediate price shocks. “Oil companies were losing ₹10 to ₹14 on every litre of petrol and ₹25 to ₹30 on diesel,” he noted. With global prices now softening, firms are gradually adjusting retail rates to offset those losses and maintain operational viability.

Daily dynamic pricing and its pauses

India follows a daily dynamic pricing mechanism under which fuel rates are expected to be revised every morning at 6 AM, factoring in international crude costs and rupee-dollar exchange rates. However, companies often pause adjustments during periods of extreme volatility.

Central and state taxes, along with dealer commissions, make up a significant portion of the final pump price. This layered structure often delays the pass-through of global price movements to Indian consumers.

Time lag in crude procurement

Another key factor is the time lag in actual oil imports. India’s crude oil basket, a weighted average of various grades sourced from multiple countries, averaged $107.96 per barrel in May 2026. Although Brent futures dropped to around $98.59 on Monday morning following positive signals from the US-Iran peace process, Indian refiners are still processing shipments purchased at higher rates, including elevated war-risk insurance and shipping costs through the Strait of Hormuz.

Past instances of inverse movement

This inverse trend is not new. Similar patterns emerged during the 2022 Russia-Ukraine conflict when global prices spiked and later moderated, but domestic rates were adjusted only after a prolonged freeze linked to state elections. In 2020, despite crude prices crashing during the COVID-19 pandemic, the government raised excise duties, keeping retail prices stable or higher.

During the recent 2026 Iran-related tensions, prices were held steady initially due to electoral considerations before sharp upward revisions followed.

Impact on households and economy

The repeated hikes are adding to household budgets already strained by inflation. Transport operators, farmers, and small businesses are expected to face higher operational costs, which could eventually feed into higher prices of essential commodities.

Economists warn that sustained high fuel prices may affect rural demand and overall economic recovery momentum if not balanced carefully.

What lies ahead

Oil marketing companies are likely to continue calibrated increases to clear backlog losses. However, any further softening in global crude prices or strengthening of the rupee could moderate future revisions. Consumers will be closely watching the daily price announcements in the coming weeks.

The government has not issued any immediate statement on the latest round of hikes. Industry sources indicate that the current adjustment cycle aims to align retail prices more closely with actual import costs without triggering sharp one-time jumps.