Why Oil Companies Have Hiked Petrol, Diesel Prices Third Time in 9 Days

Petrol and diesel prices have seen a third hike in nine days as the State-owned oil companies have decided to pass on some of the price increases in the international oil and gas market to consumers. As part of the strategy to implement an incremental increase, the prices of petrol, diesel, and CNG were again increased on Saturday.

The Petrol Pinch

In the last nine days, the price of petrol in Delhi has increased from Rs 94.77 per litre to Rs 99.51 per litre. This is an increase of Rs 4.74 paise per litre or 5 percent.

The price of diesel in Delhi has increased from Rs 87.67 per litre to Rs 92.49 per litre, an increase of Rs 4.82 per litre or 5.49 percent.

On May 15, the price of petrol and diesel was increased by Rs 3 per litre in Delhi. Four days later, on May 19, the price of petrol was increased by 87 paise per litre and the price of diesel by 91 paise per litre.

Now, four days later, on May 23, the price of petrol was increased by 87 paise per litre, and diesel also became costlier by 91 paise per litre.

Read | Amid Middle East War, PM Modi Tells Ministers To Explore Alternative Energy Sources

Middle East War Hits Home & Hard

The Middle East war, which is going for nearly three months, is casting a dark shadow over India's oil and gas economy. The disruption of oil and gas tanker traffic through the Strait of Hormuz has severely impacted 40% of India's crude oil, approximately 50% of LNG, and 90% of LPG imports.

Despite increasing prices thrice in nine days, the oil companies' under-recovery on petrol and diesel remains significant.

According to the May 22 report of the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum, the price of crude oil (Indian basket) was $69.01 per barrel in February 2026 before the start of the war in Middle East. This price rose to $109.31 per barrel on May 21st, 2026.

It means, the average price of crude went up by $40.3 per barrel on May 21, 2026, compared to February 2026, a jump of 58.39 percent.

Oil's Not Well: The Companies' Burden

In the first 21 days of May, the price of crude oil (Indian basket) remained high at $107.96 per barrel.

India imports more than 85% of its crude oil and approximately 60% of its LPG needs from the international market. Of this, approximately 40% of crude oil and 90% of LPG used to reach India through the Strait of Hormuz.

However, the conflict between the US and Iran has severely disrupted cargo movement through the Strait of Hormuz, and India's total expenditure on crude oil imports has increased by approximately 60%.

To reduce the growing burden of oil imports on State-owned oil companies, the Indian government decided to reduce the excise duty on petrol and diesel by Rs 10 per litre on March 27, 2026. The government decided to forego taxation revenues to reduce the growing losses of oil companies in this era of skyrocketing international prices.

It is important to note that states have not reduced VAT/Sales Tax during this crisis. State governments earn lakhs of crores of rupees each year from VAT/Sales Tax on petrol and diesel. Therefore, even during this crisis, state governments are unwilling to reduce VAT/Sales Tax on petrol and diesel.