Fuel price hike explained: Why petrol and diesel are getting costlier in India

Commuters across major Indian cities are facing a fresh increase in travel costs as prices of CNG petrol and diesel have all moved upward in recent revisions CNG prices in Delhi and Mumbai have been raised by Rs 2 per kg while petrol and diesel prices have also seen significant increases of around Rs 3 per litreTogether these changes are expected to directly impact daily transport costs from private vehicles to autos taxis and busesKnow the nationwide base change in fuel pricesThe latest revisions includeCNG prices have increased by Rs 2 per kg with rates in Delhi rising from Rs 7709 to Rs 7909 per kg while in Mumbai they have gone up from around Rs 82 to Rs 84 per kgPetrol Increased by around Rs 3 per litre in major citiesDiesel Increased by around Rs 3 per litre in major citiesThe hikes come after a long phase of 4 years of a relatively stable retail fuel pricing making the sudden upward movement more visible to consumersThe global trigger West Asia tensions and oil market disruptionThe main driver behind the price hike is none other than global energy market instability triggered by geopolitical tensions in West Asia including concerns around Iran and the Strait of Hormuz one of the worldrsquos most critical oil and gas shipping routesAny disruption in this corridor affects global supply flows of crude oil and liquefied natural gas pushing international prices higher Since India imports a large share of its energy requirements these global fluctuations quickly reflect in domestic fuel pricingCrude oil prices have already shown volatility at one point rising sharply before stabilising around higherthanusual levels keeping pressure on fuel marketsWhy are Mumbai prices more than DelhiThis disparity is mainly because of the folllowing reasonsGreater dependence on imported LNGHigher taxes and distribution costsHigher infrastructure and transportation expensesWhy the hike now after such a long freezeFuel prices in India were largely frozen for an extended period of 4 years straight despite global volatility Oil marketing companies absorbed much of the cost variation during that time reports suggesting Indiarsquos staterun OMCs burning through nearly Rs 1700 crore every single day since approximately 10 weeks following the warHowever sustained high crude oil prices and geopolitical uncertainty have made it difficult to continue absorbing losses leading to gradual retail price revisions across petrol diesel and CNGNot to ignore the fact that the increase also comes exactly 16 days after Assembly elections concluded in Assam Kerala Tamil Nadu and West BengalWho will be impacted Since a large share of urban transport depends on these fuels the impact is immediateAutorickshaws and taxis Higher running costs pressure for fare revision impacted majorly by CNGBuses Increased operational expensesPrivate vehicles Higher monthly fuel budgetsGoods transport Rising logistics and delivery costsIn Mumbai transport unions have already begun demanding fare adjustments especially for autorickshaws Other than transport unions multiple other sectors like agriculture is also expected to bear the brunt along with an upward push in the overall inflation rate of the countryWhy all three fuels are moving togetherThe simultaneous increase in petrol diesel and CNG reflects a broader energy trend also creating a ldquocombined inflation effectrdquo on transport fuel amplifying the burden on commutersHowever unlike CNG that follows global natural gas pricing petrol and diesel are more directly tied to global crude oil prices Both of these factors are influenced by the same geopolitical and supply chain disruptionsWhat is expected in futureThis price hike was inevitable owing to the geopolitacal tensions though Indiarsquos response has been relatively delayed as compared to nations worldwide Oil Marketing Companies OMCs have already absorbed significant losses and experts say the current revision may be only the first phase with further changes possible depending on global developmentsThey also note that fuel prices are now closely tied to global market stability making volatility likely if tensions persistHowever for commuters the result is a unified cost increase across the transport ecosystem from autos and buses to private vehicles with more adjustments possible if global conditions remain unstable