At the time of the war, crude prices had reached a peak of 52 weeks. From then till now, the prices of crude oil have seen a decline of more than 40 percent. India’s largest private fuel retailer has finally reduced the prices. But it may take a few more weeks for common customers to get relief at government pumps. For the first time since the beginning of the conflict in West Asia, the price of Indian crude basket has fallen below $ 70 per barrel. Energy and geopolitical experts say that a slight reduction of Rs 2-4 per liter in petrol and diesel prices is most likely, but this can happen only in late July or early August, and that too if the fragile ceasefire between Iran-Israel-US remains in place.
Nayara reduced prices, waiting for government fuel station
Nayara Energy, India’s largest private fuel retailer with over 7,000 fuel stations, has become the first company in more than two years to reduce fuel prices. From July 1, it has cut petrol prices by Rs 5 per liter and diesel by Rs 3 per litre. The company has withdrawn the increase made in March due to increase in crude oil prices during the West Asia conflict. However, state-owned oil companies – Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) – which together run more than 90 per cent of India’s fuel stations, have not changed their prices yet.
There was some relief in LPG prices also. Oil marketing companies reduced the price of commercial 19-kg LPG cylinder by about Rs 173-184 in big cities from July 1. The cut was made after the government resumed LPG supply to hotels, restaurants and industries, which was banned during the crisis. The price in Delhi decreased from Rs 3,113.50 to Rs 2,930. However, there is no change in the price of domestic 14.2-kg LPG cylinder. Apart from this, the price of Aviation Turbine Fuel (ATF) for domestic airlines was also reduced by Rs 5 per liter, making it Rs 110 per liter.
Fuel prices will not reduce immediately
Ross Maxwell, global strategy operations lead at VT Markets, said in the FE report that India is now in a good position to consider reducing fuel prices as global crude oil prices have fallen and tensions between the US and Iran have eased. However, he said that the prices of petrol and diesel depend on many other things apart from the prices of crude oil. Refining costs, transportation costs, exchange rates, taxes and commission of oil companies – all play a role in this. Since India buys crude through contracts signed weeks ago, refiners are still using expensive oil that was purchased before the prices fell.
Maxwell said that because of this, there is a lag of about two to four weeks between the decline in international prices and the full impact being reflected in the refinery’s input costs. He further said that there is a possibility of meaningful talks regarding reduction in retail prices in the second half of July and early August.
Regarding possible cuts, Maxwell said that if crude oil prices remain stable or fall further, then there is a possibility of a cut of about Rs 2-4 per liter in the prices of petrol and diesel. He also believes that the government would probably prefer to make lower cuts so that oil companies can compensate for some of the losses incurred during the crisis and the government also continues to get some revenue from excise duty.
In the case of LPG, he said prices are determined slightly differently as domestic cylinder rates are influenced not just by crude oil prices but also by international LPG benchmarks and government subsidy policies.
Maxwell further explained that the timing of any cut in fuel prices will also depend on inflation. Lower fuel prices will help in reducing transportation costs and can also support the government’s efforts to control inflation. With food inflation under control and energy prices falling, policymakers have an opportunity to provide some relief to households while maintaining fiscal discipline.
Mathematics of buying and selling oil
The ‘Indian basket’ of crude oil – the average price of different types of crude oil imported by India – had at one time reached $146 per barrel during the US-Iran-Israel conflict of 2026. Now it has fallen below $70 per barrel. In February 2026, the price of Indian Basket crude oil was $69.01 per barrel. At that time, the price of petrol in Delhi was around Rs 94.77 per litre.
By April, the price of the Indian basket rose to $114.48 per barrel due to increased tensions around the Strait of Hormuz. Even then, there was very little change in petrol prices. The Indian government started increasing petrol prices in mid-May 2026. After several increases (starting at ₹3/litre), the total increase by the end of May was around ₹7.5 per litre.
Crude oil prices fell between $80 and $90 per barrel on most days in June. Still, the price of petrol in Delhi is more than Rs 102 per liter. According to Petroleum Planning and Analysis Cell data, the price of Indian crude oil basket fell to $68.86 per barrel on June 26-27, more than 56 percent less than the March high. Due to this, many people are wondering why the prices of petrol did not fall despite crude oil being cheap.
The answer lies in how India’s government oil marketing companies (OMCs) handled the huge increase in crude oil prices. Companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum did not pass on the entire increase in crude oil prices to customers when oil became expensive.
Instead, petrol and diesel prices were increased much less than the actual increase in import costs. The first change in fuel prices took place on May 15, and was followed by more changes in the same month. Overall, the prices of petrol and diesel increased by more than Rs 7 per liter. If the companies had passed on the entire increase in crude oil prices to the customers, the increase in prices at petrol pumps would have been much higher.
Petroleum Minister Hardeep Singh Puri has said that fuel prices are likely to come down “in the coming months”. He said oil companies are still refining crude that they bought several weeks ago when prices were very high. He also said that the government itself bore the burden of about Rs 1.23 lakh crore to protect the customers from the full impact of the crisis.
To reduce the burden on customers, the central government reduced excise duty on both petrol and diesel by Rs 10 per litre. According to brokerage estimates, this decision reduced the government’s revenue by about Rs 1.8 lakh crore every year.
Additionally, oil marketing companies bore most of the additional costs themselves, rather than passing them on to customers. Between March and May, these companies suffered losses (under-recovery) of about Rs 1 lakh crore on petrol, diesel and LPG.
According to brokerage JP Morgan, oil companies’ marketing margins on petrol and diesel are already higher than before the conflict. Both low crude oil prices and the government’s decision to continue cutting excise duty have helped improve their margins. However, the brokerage also pointed out two important concerns.
First, oil marketing companies took huge loans while incurring losses during the crisis. That debt may affect their earnings in the near future. Second, a large part of the improvement came because the government kept the excise duty low. If the government later decides to increase those duties again after the oil companies have recovered, some of the existing benefits may be lost.
India benefits if crude falls below $70
Anish Dey, global head of energy, natural resources and chemicals at KPMG International, expects oil prices to remain stable despite the recent military conflict. Earlier this week, there was a shootout between the US and Iran despite the 60-day agreement and both sides accused each other of violating the agreement. However, America later said that talks are progressing.
He said that despite the renewed military clashes, the ceasefire is expected to remain largely intact and more supplies will come to the market. Day expects that due to excess supply of oil and low demand (especially from China), the price of Brent crude will remain between 70 to 75 dollars per barrel. According to him, this is a comfortable level for India and this will help the oil companies to recover some of their past losses.
He also estimated that the price of crude oil could go below $70 per barrel. While this could hurt oil producers, it would be “good for the Indian economy and could strengthen the rupee.” This is proving to be true as the rupee has recovered by about 2.8 per cent from May’s low with softening crude oil prices.
After hitting a record low of around 97 against the US dollar on May 20, the Indian rupee has recovered to around 94.50, making it one of Asia’s best performing currencies in June.
Should the government wait for stability?
Former Indian ambassador Anil Trigunayat, who has worked in several Middle Eastern countries, said in the FE report that he understands why consumers want fuel prices to come down rapidly. He said that as a consumer I wanted this to happen tomorrow itself. But as a geopolitical analyst, the reality on the ground demands wisdom – we are in the midst of an uncertain future, and all is not well in the Strait of Hormuz.
Trigunayat praised the government for protecting consumers and businesses by carefully managing fuel prices and absorbing a large portion of the additional costs. He believes that it would be wiser to wait for the crisis to end completely before making a permanent cut in prices. He said that during the conflict and temporary closure of the Strait of Hormuz, India increased imports of crude oil from more than 40 countries, including the US, Venezuela, Argentina, Brazil, Russia and several African countries.
Earlier, during some periods of crisis, the price of India’s crude basket had increased from a low of $70 to $120-126 per barrel. The price of LNG increased by 46 percent, as did the cost of war-risk insurance and shipping. However, he refused to predict when fuel prices would actually come down. The former IFS officer said that it is reasonable to trust the Petroleum Minister’s statement that prices will come down, but to expect that this will happen tomorrow is unrealistic.
