Impact of Strait of Hormuz Disruptions on Petrol Prices in India and Surrounding Countries Amid Oil Supply Challenges
A month into the ongoing conflict in the Middle East, global crude oil markets are feeling the pressure, with prices soaring nearly 50% since the United States and Israel initiated strikes on Iran on February 28. This escalation has prompted a strong reaction from Tehran, leading to oil prices peaking at $119 per barrel before settling around $100. The ripple effects are being felt worldwide, particularly in countries heavily reliant on oil imports, such as India, which is grappling with rising fuel costs and supply concerns.
Impact on India’s Fuel Prices
India, which imports approximately 88% of its crude oil and nearly half of its natural gas, is facing significant challenges due to the surge in global oil prices. The Indian government has intervened to alleviate the financial burden on consumers and oil companies by reducing excise duties on petrol and diesel. This decision is expected to cost the exchequer around Rs 1.3 lakh crore. Currently, major fuel retailers like IndianOil, Hindustan Petroleum, and Bharat Petroleum are incurring losses of about Rs 24 per litre on petrol and Rs 30 per litre on diesel. To mitigate these losses, the government has cut the special additional excise duty on both fuels by Rs 10 per litre while imposing export duties of Rs 21.5 per litre on diesel and Rs 29.5 per litre on aviation turbine fuel (ATF) to prevent windfall gains. Despite these measures, India’s dependence on imports remains high, with reserves sufficient for only about 60 days.
Regional Responses to Rising Fuel Costs
Countries in the region are also taking steps to address the rising fuel prices. In Nepal, the Nepal Oil Corporation has increased petrol and diesel prices by Rs 15 per litre, citing higher international purchase costs. This adjustment follows a previous price hike just two weeks earlier. Petrol prices in Kathmandu now range between Rs 184.50 and Rs 187 per litre, while diesel and kerosene are priced between Rs 164.50 and Rs 167 per litre. Meanwhile, Bhutan is considering implementing fuel-saving measures, including work-from-home arrangements and targeted rationing, to conserve supplies. Authorities have indicated that existing reserves are adequate for now but may introduce stricter measures if the situation deteriorates.
In Pakistan, kerosene prices have risen by PKR 4.66 per litre, while petrol and diesel remain at PKR 321.17 and PKR 335.86 per litre, respectively. The government is absorbing part of the cost burden to shield consumers, but recent price hikes have contributed to increased living costs, affecting transport fares and the prices of essential goods. Sri Lanka has also raised fuel prices by around 25%, marking its second increase in a week, which has raised concerns among transport operators about potential disruptions.
Broader Implications and Global Responses
The energy supply crunch is not limited to South Asia; countries like Bangladesh are ramping up diesel imports from India, with plans to bring in an additional 45,000 tons by April. The Bangladesh-India Friendship Pipeline has resumed operations after a brief halt, facilitating these imports. However, the situation has led to rolling blackouts and the shutdown of many fertilizer plants due to gas shortages.
As the conflict in the Middle East continues, global energy flows remain at risk, particularly through the Strait of Hormuz, a critical passage for oil transport. This route carries nearly 20 million barrels of oil daily, accounting for about a quarter of global seaborne trade. Disruptions in this area could have widespread implications, prompting countries to respond with a mix of price hikes and tax measures to manage supply pressures while attempting to protect consumers.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
