Fuel Prices Hiked Again. Here’s What Happens If This Crisis Gets Worse | Faye D'Souza

Added: 2026-05-26

[00:00:00]Well, we've had another fuel price hike this morning and since the 15th of May, it was about 10 odd days ago, we've seen four price hikes and we've, you know, the hike cumulatively is about 72 rupees per liter. So, Delhi is paying more than 100 rupees a liter of petrol right now.

[00:00:16]Um, Mumbai's been paying that for a while and the immediate question you'd be asking I'm asking is when will this stop? I mean, are we looking at 130 rupees, 150 rupees, 200 rupees? It's not a ridiculous question anymore. But the reason we're bringing this up with this video is because it's not just about crude oil and it's not just about the rupee. It's also about taxation, the management of our economy and at the end a moral question that the government has to answer about how it's going to manage this crisis that is going to affect every single Indian including you and me. So what is really going on with crude with fuel prices and how high is it likely to go in India? That's the question we're going to attempt to answer. Before I start, remember like, share, subscribe, sign up for our membership. If you sign up for our membership, you'll get a bulletin every day uh which in which we give you the news in the calst way possible. And I think that I'm starting to believe now that that's my contribution to the universe is to put out the news in the calest way possible. We'll also, if you are a member, give you access to a monthly meeting, which is our editorial accountability meeting where you can ask me as the editor questions about what story we covered, how we covered it, what story we chose not to cover, and it is my obligation to answer your questions as editor. You'll have access to those meetings if you sign up as a member. Okay, let's get started. What is going on with fuel? Now most people think that the price rise that we're seeing is entirely because of crude oil increase which is what the government is telling us but that is not entirely true. If crude goes up petrol should go up but that's but when crude has gone down petrol has not gone down and that's what we're going to examine. Now India imports 85 sometimes 88% of its total crude needs which means that we are deeply dependent on international oil and we buy those buy that oil in dollars. So there are two variables. One is the price of oil internationally. Two is the rupee dollar currency rate. So obviously if the rupee gets devalued, you're paying more rupees per barrel of crude. But once you bought that crude, then what happens? It has to be shipped to India. It has to be insured while it is shipped to India. It has to be refined. It has to be distributed.

[00:02:24]There's an oil marketing company margin and there is a dealer margin. And then of course there is the government. The government taxes. the send the central government taxes through excise duty and state through VAT. So let me put up a uh you know a breakdown for you. This is business standard on the 27th of March before the prices started going up. This was the break up of an average uh liter of petrol, 40 rupees of crude, 5 rupees of refining and freight, three rupees of oil company marketing, 20 rupees central government taxes, 25 rupees state government taxes, four rupees dealer commission and a total of 97 rupees a liter. Now uh taxes alone were about half or more than half of what you're paying per liter of petrol. So if you're asking how is oil become so expensive is because governments are making a fat packet through taxes because they know that this is a great way to make money.

[00:03:15]Uh it gets collected at the source. Uh everybody needs fuel. So it just comes straight in. There's no sort of compliance issue. You're not collecting income tax. all of that you know this is the easiest cleanest way for the government to make to collect taxes. So it becomes politically important then to ask the questions of if crude prices are going up which the government has told us that they are. Is the government going to cut its taxes and give us relief? Let's look at the first question we have to answer here. What is happening to everybody? Street of almost is closed for everybody. Is India being hit higher than everybody else? Yes.

[00:03:52]because of course we are particularly vulnerable and we import almost all of our oil. To give you an uh to give you a break up, right, this is according to government data before the war started.

[00:04:03]Uh in January this year we were paying about $63 a barrel of oil. In um March that went up to $113 a barrel. In April it was 114. It's eased off slightly in May but it's still 107 which is hard for us. We consume 5.5 million barrels of crude oil on a daily basis. So which that 10 rupees increase will mean about 50 million on our daily import bill. Every single day the weakening rupee makes that worse. Uh SBI's researchers warned that an additional 2 rupee depreciation on the rupee will wipe out any benefit that the current fuel hikes are giving to oil companies. So obviously there is there is pain coming from overseas. Now how bad can this get? Let's look at three and this is speculation at this point I'm telling you but partly prediction partly speculation. So we look at it in three different scenarios. Best case scenario for India is that the US and Iran actually cut a deal immediately.

[00:05:05]They call the whole thing off. Shipping resumes through the straight of oil cools off below $90 a barrel which is where we need it to be. The rupee steadies. Oil companies stop taking losses. Fuel goes back to say 90 97 rupees a liter and it's still painful for that short period but it becomes manageable. Medium case scenario is the conflict drags on which means crude stays above $100 a barrel. Shipping and insurance will remain expensive because of the risks of shipping. Right now there's a war on the rupee will stay under pressure and Reuters has said that u you know another hike might be on the way. So we've just done hike number four we might see hike number five. So which means that you know another 2.5 rupees or three rupees u maybe five rupees if um oil stays above $100 a barrel for a long part of time. So inflation will start to eat through our economy and that will start to hurt. worst case scenario. This is a worst case scenario.

[00:06:07]Um, and it's an ugly one. The conflict escalates. Hormones depression worsens um and crude goes up to say $120 a barrel or even higher, the rupee will will weaken automatically and the government does not cut taxes, then we could look at 150 rupees per liter of um fuel easily. It does not sound absurd at all to be discussing it at this point. If we reach that point where we are looking at crude actually moving up further, the question that we have to ask remember I said there's a moral question who absorbs the pain and there is a choice here. Should the oil companies absorb the pain?

[00:06:47]Should the government of India and the state uh governments absorb the pain or should regular ordinary citizens absorb the pain? Now let me explain these three categories to you. Oil companies. India has three state-run oil companies.

[00:07:00]Indian oil, BPCVL, HPCL. Now they posted profits collectively of 77,000 cr rupees in FY26.

[00:07:10]Take a second. 77,000 cr rupees. That is a 130% jump from the previous year. And that makes the counter argument obvious because now they're crying saying, "Oh my god, we're losing so much money. We have to increase prices. We can't survive." Really? And did you survive last year when you made 77,000 cr rupes or 130% bump up in your profit? I didn't hear any complaining from the citizen who was paying that money. Right? So now they're saying they're losing money.

[00:07:38]They're saying there are they're losing about a,000 cr rupees a day. U let's say they lose a,000 cr rupes a day. Over a year they will lose 365,000 uh cr rupees. So when global crude prices collapsed during the pandemic, Indian customers or Indian consumers did not get any sort of proportionate relief. The central uh excise collections had surged. The central government uh made 2.23 lakh cr rupees in FY20 during COVID.

[00:08:10]They made five lakh cr rupes during FY22 and over a three-year period alone it made 11 lakh cr rupees from fuel taxes.

[00:08:21]So basically the three staterun oil companies made 1.1 lakh cr rupes in profits and uh you know the central government has made 11 lakh cr rupes during the time that crude oil was low and the Indian citizen was paying that money without complaining and now suddenly crude oil has gone up oh my god we have to pass it on there's nothing to be done I beg to differ that there is nothing to be done there is a uh another angle to all of this which is that from the time and you'll remember this we've discussed this uh from the time the Russia Ukraine or war started Europe and America stopped buying oil from Russia.

[00:08:58]So Russian oil became really cheap because there were sanctions. India went ahead and bought oil from Russia saying hey we should be allowed to buy whatever is cheap in order to offer the best to our citizens. Correct? Great answer.

[00:09:11]Where is that best that you are offering to your citizens? In the first 9 months of 2023 according to a Reuters estimate India saved 2 7 billion by buying oil from Russia instead of buying from the Middle East. The comparison that Reuters has made is basically they said Russian crude at that point was about $525 per metric ton and Iraqi crude at that point was $556.

[00:09:38]So there was a roughly $39 per metric ton. So India was making was saving a lot of money. So there was a 20 to30 uh dollars per barrel below the benchmark on Russian crude that you were sa saving that of course over the two years narrowed and it became close to $10 a barrel. But even so according to that calculation India saved between 10 billion and 20 billion over the course of two years by buying oil from Russia.

[00:10:08]Where has that money gone is the question. So in rupee terms we're talking about 1.7 lakh cr rupees plus in import savings. So now let's ask the question of where did that money go?

[00:10:18]We're likely to have saved if you gen after that refining economics freight insurance currency depreciation taxes oil company pricing all of that is still 1 lakh cr rupees that we have saved by buying discounted oil as a country.

[00:10:35]Where did the money go? And we talked about this in our previous video where the money has gone in um large infrastructure spending. The money has gone in direct transfers or you know it depends on whether you call it direct benefit transfers or you call it freebies that's up to you. Uh it's also gone in large scale defense spending.

[00:10:53]India has spent a lot of money on defense equipment. All of that money has gone there and now when the prices have gone up we like oh we don't have any cushion to actually um you know absorb any losses. really you absorb the profits quite a bit for several years.

[00:11:08]So remember and it brings us now to the taxation problem which is that government tax is that cushion of 50 rupees per liter of petrol which means that you can start cutting taxes instead of passing on that pain to the Indian citizen. Petrol and diesel have very carefully been kept outside of GST and they've been kept outside of GST so that center and state can continue to collect tax on it. Now the finance minister Nirvas Sid Raman has said the government gave up 1 lakh cr rupees in revenue in order to shield the Indian consumer. Um and that's probably true and that's very kind of you but what happened to all of the money you made when the prices were lower? The other question that comes up when it comes to fiscal management and just running the country better is why don't we have emergency reserves? Where are the emergency reserves? India has strategic petroleum reserves of roughly 36 to 39 million barrels. This covers about 7 days of direct consumption. Um the inventories for countries like US or China are much much higher. India remains very vulnerable especially because we import almost everything and so we should be doing a better job of keeping of maintaining reserves because the reserves we maintain right now gives us a cushion of a couple of days. uh as soon as it runs into weeks we have pain which we've been having and when it runs into months we now have a macroeconomic crisis that we're currently facing um and I want to tell you why this is important right because this is not about those of us who own cars and are putting money uh putting petrol in our cars or diesel in our cars yes that hurts ethanol blending hurts as well but the people who are really hurting are the workers of our country and I'll tell you why we have um over the last several years built an economy where all of the jobs that have been created are gig worker jobs, delivery boys, Ola, Uber, bike, taxis, this sort of work, right?

[00:13:13]People who come to your home to give you a haircut, to give you a massage, to like do your electric work, they have to travel and all travel costs money. So yes, these are the big things that will hurt if the government chooses to pass on the pain and not absorb it. Trucks, buses, agriculture, freight, supply chain, coal storage, food distribution, everything will become more expensive, which means every vegetable, every tomato, every liter of milk will become more expensive. And so for the people who are pinching their household savings to make it actually extend, they will have to stop giving their children milk.

[00:13:45]They will have to stop buying LPG. they will have to stop buying groceries and buy less vegetables which means nutrition will get hit. It just has such a massive scale uh impact on our uh on our population and then of course the gig workers, the delivery riders, the cab drivers, the truck operators, the farmers who need diesel to pump water and to run their taxi uh their tractors, the fisher folk who need the diesel to actually run their uh boats to go out to sea. small businesses. These are the ones that will really get hit. According to a report in Times of India, gig workers in Bengaluru are already demanding higher payouts. They're saying it's just un unstable right now. They cannot make these incomes work. We've seen taxi drivers are asking u you know for higher pay. Auto drivers are asking for higher pay. In fact, um remember they're paying more for CNG and for diesel. But the actual rate at which they can charge the customer has not increased because that the government is controlling and the governments will like to control these things because it's a political hot potato. If I have to pay more, I don't like it. It's going to affect the popularity of the government. Now, what the government is saying very clearly is that oh my god, you know, the world is in a crisis and we have to be patriotic and be willing to pay more. What they are not saying quite conveniently is they're not giving us accountability for the money that has been rad in over the last several years uh by doing all of these various things.

[00:15:14]And they're not telling us that they have room to cut those taxes and absorb that pain and not pass it on to the poorest member of our society. At a time when we're going through a heat wave, when people are struggling to make ends meet, when inflation is high, at this point to be passing on seven and a half rupees of uh price increase to the average citizen is quite frankly not morally correct. When you absorbed all of the good stuff, you absorbed all of the benefit and the profit, you are passing on the losses to the poorest and the weakest among us. And that is really the question we should be asking our government. We should not be asking oh why aren't you buying oil from Russia or Iran. We should be asking what happened to the money that you saved by buying oil from Russia which you know we did over the last couple of years. What happened to the money that you saved during COVID and during uh you know all of the years through COVID and now you charged us extra taxes. Where did that money go? And why haven't you actually maintained responsible reserves of fuel and of uh you know of a buffer where you can actually absorb this pain instead of passing it on to the citizen who's already paid their due. We've already done the patriotic thing. We've paid the money. This is a question of mismanagement. This is a question of not using the money judiciously and not being prepared for a rainy day which any responsible person knows you have to do.

[00:16:43]That is the question to ask. Leave me a comment in the comment section if you believe that the government should be answering these questions right now before they pass on another fuel hike to us in the next couple of days.