Fuel prices in India have surged by about eight rupees over the past two weeks, marking the steepest rise in four years. The increase, implemented in four installments, has raised concerns about its impact on the economy and household budgets.

The primary driver is the escalating conflict in West Asia, particularly tensions between Israel, the US, and Iran, which have disrupted global oil supply chains. The partial closure of the Strait of Hormuz, a critical oil transit route, has pushed crude oil prices to $120 per barrel. India, which imports 85-90% of its crude oil, is directly affected. Additionally, the weakening rupee against the US dollar has increased import costs. While India previously benefited from discounted Russian crude during the Ukraine war, new US sanctions have reduced that advantage.

Public sector oil companies—Indian Oil, Bharat Petroleum, and Hindustan Petroleum—had refrained from raising prices during the election period, incurring daily losses of around ₹1,000 crore. Even after the recent hikes, they continue to lose ₹10-14 per liter on petrol and ₹25-30 per liter on diesel, according to BPCL chairman. Total losses for the quarter are estimated at ₹57,000-58,000 crore. Despite the central government reducing import duties, companies still face a loss of ₹17-18 per liter.

The government claims the increase is modest compared to other countries, with India seeing only a 4-5% rise over the past three months versus 54.9% in Pakistan, 52.4% in UAE, and 44.5% in the US. However, experts warn that further hikes are likely as companies need to recover losses, potentially adding another ₹10-15 per liter. In Kerala, the state government’s high taxes—including 30.08% sales tax plus additional cess—make fuel more expensive than in other states. Chief Minister V.D. Satheesan has promised to consider reducing fuel taxes in the upcoming budget, but no concrete steps have been announced yet.

If fuel prices continue to rise, the impact will be widespread. Transportation costs will increase, pushing up prices of milk, vegetables, and other essentials. Farmers will face higher diesel costs for agriculture. Taxi, auto, and bus fares may rise, and ride-hailing companies like Ola and Uber could introduce surge pricing. Aviation fuel price hikes will make air travel more expensive. Online delivery platforms like Swiggy, Zomato, and Blinkit may increase delivery charges. Households will have less savings, and the RBI may raise interest rates to control inflation, making home, vehicle, and business loans costlier. The situation is expected to persist until peace is restored in West Asia.