War-Driven Oil Surge: Why Fuel Prices Are Stable - For Now

The war between the US, Israel, and Iran has pushed up global oil prices sharply, and this is directly touching the lives of common Indians through petrol and diesel costs. As of March 28, 2026, petrol prices in New Delhi are steady at Rs 94.77 per litre while diesel stands at Rs 87.67 per litre. In Mumbai, you still pay Rs 103.54 for a litre of petrol and Rs 90.03 for diesel. These numbers have not moved from yesterday, but behind the scenes things are far from stable.Crude oil prices have experienced significant movement since the start of this conflict on February 28, when Iranian facilities were attacked. For example, Brent crude rose to over $119 per barrel before falling back to about $100. In addition, West Texas Intermediate (another

important benchmark for crude oil) went from approximately $70 prior to the fighting to over $92. These price increases are leading to real global supply issues and hitting countries such as India, which imports almost all of its crude oil (approximately 88%). Almost half of these shipments pass through the narrow Strait of Hormuz. When trouble hits that area, it quickly threatens fuel supplies at home. Warnings from Iran to ships and insurance companies stepping back have made it harder and costlier to move tankers, adding to the worries.To protect people from sudden jumps in fuel prices, the government has cut excise duty on petrol from Rs 13 per litre down to only Rs 3. On diesel, the duty has been removed completely — it used to be Rs 10 per litre. The main aim of this cut is to stop petrol and diesel at the pump from becoming much more expensive even as global crude costs rise. Without this step, prices could have gone up by as much as Rs 24 for petrol and Rs 30 for diesel per litre.Because of the lower duties, oil marketing companies are absorbing the extra cost of buying and refining crude right now. That is why you are not seeing any increase — or decrease — in what you pay at the petrol station. The duty cut is working as a shield to keep retail prices stable for the time being. This relief for consumers comes at a heavy cost to the government’s pocket. Officials say the excise duty reduction will cause a revenue loss of about Rs 7,000 crore in the next 15 days alone. It is a short-term sacrifice meant to stop inflation from shooting up and to save ordinary families from immediate pain at the fuel pump.At the same time, the government has put new duties on exports to make sure enough fuel stays inside the country. It has slapped an export duty of Rs 21.5 per litre on diesel and Rs 29.5 per litre on aviation turbine fuel. The purpose is simple: discourage refiners from selling too much abroad and stop them from making windfall profits while local supplies are tight. The government hopes to collect around Rs 1,500 crore from these duties in the first two weeks. These rates will be reviewed every fortnight.Private players are handling the situation in their own ways. Nayara Energy has raised petrol prices by Rs 5 per litre and diesel by Rs 3 per litre at its outlets to cover higher costs. Jio-BP, however, has kept its prices unchanged even though it means bearing some losses for now.India has been building some protection against such shocks over the years. The country currently holds strategic crude oil reserves of about 53 lakh metric tonnes and plans to increase this to over 65 lakh metric tonnes soon. Ethanol blending in petrol has already helped reduce crude imports by around 4.5 crore barrels every year. Other efforts like expanding metro rail, electrifying railways, and growing domestic refining capacity have also lowered the need for diesel.Prime Minister Narendra Modi has been talking directly with leaders in Iran, the US, and other countries to keep oil and LPG tankers moving safely. India has also spread its oil buying wider — now sourcing from 41 countries instead of 27 earlier. Russian crude has become an important option to fill gaps when Middle East supplies get disturbed.In response to the ongoing conflict involving Ukraine, the Federal Government has created 7 special task forces to keep watch on the availability of fuels and monitor the supply chain and logistics systems to help reduce the strain on petrochemical products. For most individuals, while the price at the pump is stable, there are signs of increasing prices from other sources. Increasing oil prices cause increased transportation costs, which results in increased prices for vegetables, dairy products, groceries, and just about everything that needs to be transported from farms and manufacturing sites to retail locations. If the war persists, crude oil prices will remain elevated, leading to rising inflation rates across the globe, which will continue to place strain on family budgets. All businesses engaged in transporting goods, storing goods, or manufacturing goods will experience higher costs, ultimately leading to reduced economic growth rates and even higher prices for goods. The excise duty cut gives immediate relief at the petrol pump, but it widens the government’s fiscal deficit. More borrowing by the government can push interest rates higher, affecting home loans, car loans, and business investments. In simple terms, the US-Iran war has started a chain of problems. Expensive oil increases India’s import bill, weakens the rupee, raises inflation risks, and creates pressure on government finances and the stock market. The duty cuts and new export duties are attempts to balance the needs of common people, oil companies, and the larger economy.Right now, petrol and diesel prices at the pump remain unchanged, giving some breathing space. But the pressure from high global crude prices is real and will keep affecting daily life and the Indian economy in the weeks ahead. How long this situation lasts will depend on when peace returns to West Asia and whether oil prices come back down to normal levels.