Petrol, Diesel Prices Hike Hits Consumers. But Why Was There No Relief When Global Prices Were Low?

Added: 2026-05-26

[00:00:00]Petrol and diesel prices continue to burn a hole in Indian pockets. The Modi government has announced another round of hike in fuel prices for the third time in 10 days. Today, petrol prices were increased by 0.87 rupees per liter and diesel was up by 0.91 rupees per liter. Now, on the face of it, this may seem negligible, but in reality, each hike continues to put pressure on commuters, transporters, and businesses.

[00:00:26]After all, fuel is indispensable. It drives everything from your essential goods to your office commute. The government says the hike is due to high oil prices globally following the war in West Asia between Iran, Israel, and US.

[00:00:40]The Modi government, after celebrating the highs of huge election victories, now says that such economic shocks are inevitable and that you and I should bear the burden in national interest. In this video, let's take a closer look at these fuel price hikes, the logic behind it, the necessity, money, market, political compulsions, everything that dictates it, and why the Modi government has some explanation to offer. Hello and welcome. I'm Shubham Chaudhry. Let's get started. So, first, let's take you through the latest what the government has said before we get into the bigger picture. Like I said, fuel prices were hiked again this morning. Depending on the city you live in, this is how much you will now have to pay for a liter of fuel. Among the major cities, Kolkata has the most expensive petrol where customers have to pay 110.64 rupees for 1 liter of petrol. Kolkata is followed by Mumbai, Chennai, and Delhi where petrol is about to hit a century.

[00:01:33]This was, like I said, the third round of fuel price hike in 10 days. The first of these came on the 15th of May. That was 3 rupees per liter increase in petrol and diesel prices. On May 19th, there was an increase of 90 paise per liter in fuel prices. And today, the 23rd of May, an additional increase of up to 91 paise per liter. This uncertainty around fuel supply has left people in a lurch. Many have begun panicking. They're queuing up at petrol pumps trying to stock as much fuel as possible. In rural areas, the anxiety is even higher since diesel is essential for agricultural work with the kharif season just around the corner. A video from Maharashtra's Buldhana has gone viral capturing this chaos in rural India. With reports of short fuel supply, people rushed to fuel pumps with cans in a bid to stock up as much as possible. Take a look.

[00:03:10]Yesterday, meanwhile, India's Ministry of Petroleum and Natural Gas put out a post assuring that despite rumors, India has enough petrol and diesel supplies.

[00:03:20]Indian Oil Corporation, the IOC, which is India's largest oil company, said there was no overall fuel shortage and outages at some retail outlets were highly localized and temporary. Now, the reasons for this fuel price hike are very clear. There's a war going on in West Asia and the Strait of Hormuz is blocked, which is a narrow sea passage between Iran and Oman that serves as a gateway for transporting about 20% of the entire world's oil and LNG. As for India, it imports almost 88% of its annual crude oil requirements, roughly 1.8 billion barrels a year. On a per day basis, it works out roughly 5 million barrels of oil per day. About 50% of India's imports passes through the Strait of Hormuz. All of that has been affected following the war in West Asia.

[00:04:06]As a result, global oil prices have shot up to as high as $115 per barrel. Supply chains have been hit, and India's government-owned oil companies are bleeding crores of rupees daily. The government says its oil companies are losing anywhere between 1,000 crore to 1,200 crore rupees on a daily basis by selling petrol, diesel, and LPG below the market rates. Now, this loss this financial loss has to be compensated for. And the answer lies in passing the burden onto the consumers in order to recover this cost. Now, that's fair and understandable to a certain extent. In fact, that's what economists many of the economists say, too, that by delaying or not hiking fuel prices, the government is only delaying the inevitable. But if you take a step back and look at a broader picture in recent years, one would realize that the customer never actually benefited from these dynamic oil prices. Let me explain. Now, take a look at this chart on your screen. This chart is courtesy of The Indian Express. On the left side of this chart, one column shows the price India paid in dollars per barrel for crude oil. The next column shows the retail price of petrol in the city of Delhi. The first three figures marked in blue are from the UPA era, 2011 to 2014.

[00:05:23]That's when global oil prices were high.

[00:05:25]In fact, they were over $100 per barrel.

[00:05:28]As a result, the consumer had to pay more at the fuel pump. So, high global prices, high fuel prices at home.

[00:05:34]Understandable. But since 2014, when Mr. Modi came to power, global crude oil prices fell to under $100 a barrel until, of course, the West Asia war began in Feb 2026. Now, here's an interesting part. Despite low crude oil prices globally, comparatively, retail prices have only gone up. Meaning, even when crude oil became comparatively cheaper for the government to buy in the global market, consumers like you and me still had to pay higher prices at fuel pumps. The benefit of low global oil prices were never passed on to the customer. Mind you, this also includes the COVID year when global crude oil prices fell by 30%. Yet, the prices we had to pay for petrol and diesel actually went up progressively. Now, if you were charged more, where did the excess money go? For that, let's take a look at how the composition of the final price we pay at petrol pumps looks like.

[00:06:27]Because that tells an important story.

[00:06:29]Now, crude oil is first bought in US dollars in the global market.

[00:06:33]A higher price there, of course, means the cost of bringing that oil or transporting that oil to India automatically goes up. Once this crude oil is imported, it goes to refineries where it is processed into usable fuel, petrol and diesel. Then, our state-owned oil companies like the Indian Oil Corporation, Bharat Petroleum, and HPCL, Hindustan Petroleum, buy it and then distribute it to different petrol pumps across the country. Now, together, these three companies control more than 90% of India's petrol pumps. By the time this petrol or diesel reaches your nearest petrol pump, it also goes through a layer of government taxes. There's central excise duty, a tax levied by the central government per liter. Then, depending on each state government, a VAT or value-added tax is levied as well. That's why you will see fuel prices vary in each state and city.

[00:07:21]Then, there's dealer commission that is charged, and then there's the oil company's own margin that is also included in the final price. But, these government taxes that I just told you about, these taxes alone make up around 40 to 55% of the final price you pay at the pump. Now, go back to that chart I just showed you. Why was fuel getting expensive even when global prices dropped because these components I just told you about kept changing. So, government taxes went up when global oil prices were less. The dealer and the OMCs, their margins and commissions also went up. All in all, this extra money went into their pockets. As a result, the customer had to pay more with each passing year. At that time, when the global crude oil prices were low, the benefit of that was not passed on to us, the consumers. And no, the government can't say simply that higher prices currently is all because of the war.

[00:08:14]It's also because in normal times the government hiked their share of excise duties and taxes, denying any sort of relief to the common man. And now, here we are, a time of crisis. The government finds it difficult to contain losses due to extremely high oil prices. And it is us, the consumers, once again, who have to shoulder this burden. All of this in the name of national interest. Do you think it's fair? Do comment and let us know what you think about it. That's all for this video. Thank you so much for watching.

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