Global crude prices have retreated sharply from their wartime peak, and India’s largest private fuel retailer has finally blinked. But for the average consumer at a public-sector pump, relief is still weeks away.
With the Indian crude basket sliding below $70 a barrel for the first time since the West Asia conflict began, energy and geopolitical experts tell Financial Express that a modest cut of Rs 2-4 per litre on petrol and diesel is now the most likely outcome, but only by late July or early August, and only if the fragile Iran-Israel-US ceasefire holds.
Nayara cuts prices, PSU fuel stations wait
Nayara Energy, India’s biggest private fuel retailer with more than 7,000 fuel stations, became the first company in over two years to reduce fuel prices. From July 1, it cut petrol prices by Rs 5 per litre and diesel by Rs 3 per litre, taking back the hike it had announced in March when crude oil prices shot up during the West Asia conflict.
However, state-run oil companies, Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL), which together run over 90% of India’s fuel stations, have not changed their prices yet.
There was some relief on LPG prices too. Oil marketing companies reduced the price of commercial 19-kg LPG cylinders by around Rs 173-184 in major cities from July 1 after the government restored LPG supplies to hotels, restaurants and industries that had been restricted during the crisis. In Delhi, the price dropped from Rs 3,113.50 to Rs 2,930. The price of domestic 14.2-kg LPG cylinders, however, remains unchanged.
In addition to this, the price of aviation turbine fuel (ATF) for domestic airlines was also reduced by ₹5 per litre, bringing it down to ₹110 per litre.
Experts expect a cut, but not immediately
Speaking to Financial Express, Ross Maxwell, Global Strategy Operations Lead at VT markets, said India is now in a good position to consider reducing fuel prices because global crude oil prices have fallen and tensions between the US and Iran have eased.
However, he said petrol and diesel prices depend on several factors besides crude oil prices. Refining costs, freight charges, exchange rates, taxes and oil companies’ commissions all play a role. Since India buys crude through contracts signed weeks in advance, refiners are still using expensive oil purchased before prices dropped.
“This creates a lag of around two to four weeks before lower international prices are fully reflected in refinery input costs,” Maxwell said. He added that “meaningful discussions around retail price reductions are likely during the second half of July and into early August.”
On the likely reduction, Maxwell said, “A reasonable outcome would be a cut of around Rs 2-4 per litre for petrol and diesel if crude prices remain stable or continue to ease.” He also believes the government may prefer a smaller cut so that oil companies can recover some of the losses they suffered during the crisis while allowing the government to retain some excise duty revenue.
In the case of LPG, he added that prices work a little differently because domestic cylinder rates are influenced by international LPG benchmarks and government subsidy policies, rather than crude oil prices alone.
“The timing of any fuel price reduction will also depend on inflation. Lower fuel prices would help ease transportation costs and could support the government’s efforts to keep inflation contained. With food inflation becoming more manageable and energy prices moving lower, there is an opportunity for policymakers to provide some relief to households while maintaining fiscal discipline,” Maxwell explained further.
Understanding how Indian oil marketing companies buy and sell oil
The Indian Basket of crude oil, which is the average price of the different types of crude India imports, had crossed $146 a barrel at one point during the 2026 US-Iran-Israel conflict. It has now fallen to below $70 a barrel.
In February 2026, the Indian Basket crude price stood at $69.01 per barrel. At that time, petrol in Delhi cost around ₹94.77 per litre. By April, the Indian Basket had climbed to $114.48 per barrel as tensions around the Strait of Hormuz worsened. Even then, petrol prices barely changed. The Indian government began hiking petrol prices in mid-May 2026, with multiple rounds of increases (starting with ₹3/litre) that totalled around ₹7.5 per litre by late May.
Crude prices dropped back to the mid-to-high $80s a barrel on most days in June. Yet petrol in Delhi costs more than ₹102 a litre, making it more expensive than before the crisis.
According to data from the Petroleum Planning and Analysis Cell, the Indian crude basket fell to $68.86 a barrel on June 26-27, down more than 56% from its March peak. This has left many people wondering why petrol prices have not fallen even though crude oil has become cheaper.
The answer lies in how India’s state-run oil marketing companies, or OMCs, handled the sharp jump in crude oil prices. Companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum did not pass on the full increase in crude prices to customers when oil became expensive.
Instead, petrol and diesel prices were raised only slightly compared to the actual rise in import costs. The first fuel price revision came on May 15, followed by more revisions later that month. Altogether, petrol and diesel prices went up by just over ₹7 per litre.
If companies had passed on the full increase in crude prices, the rise at petrol pumps would have been much higher.
Petroleum Minister Hardeep Singh Puri has said fuel prices are likely to ease “in the coming months.” He explained that oil companies are still refining crude oil they bought several weeks ago when prices were much higher. He also said the government absorbed around Rs 1.23 lakh crore to protect consumers from the full impact of the crisis.
To reduce the burden on consumers, the Centre cut excise duty by ₹10 per litre on both petrol and diesel. According to brokerage estimates, this decision reduced government revenue by around ₹1.8 lakh crore every year.
At the same time, oil marketing companies absorbed most of the additional cost instead of passing it on to customers. Between March and May, these companies built up under-recoveries of nearly ₹1 lakh crore across petrol, diesel and LPG.
According to brokerage JPMorgan, marketing margins for oil companies on petrol and diesel are already higher than they were before the conflict. Lower crude prices and the government’s decision to continue with the excise duty cuts have both helped improve their margins.
However, the brokerage also pointed out two important concerns.
- First, oil marketing companies borrowed heavily while absorbing losses during the crisis. That debt could affect their earnings in the near future.
- Second, a large part of the improvement has come because the government kept excise duties lower. If the government later decides to raise those duties again after oil companies recover, some of the current gains could disappear.
Crude below $70 would help India
Anish De, Global Head for Energy, Natural Resources & Chemicals at KPMG International, also expects oil prices to remain comfortable despite the latest military exchanges. Earlier this week, the US and Iran exchanged fire despite a 60-day agreement, with both sides accusing each other of violating the memorandum of understanding. However, the US later said that the talks were progressing.
“Despite renewed military exchanges, the expectation is that the ceasefire will broadly hold and more supplies will hit the market,” he said. De expects higher oil supply and weaker demand, especially from China, to keep Brent crude between $70 and $75 a barrel. According to him, this is a comfortable level for India and would allow oil companies to recover some of their earlier losses.
He also predicted that crude could even fall below $70 a barrel. While that may hurt oil producers, it would be “good for the Indian economy and may strengthen the rupee,” a call that is already playing out, with the currency having recovered nearly 2.8% from its May low as crude eased.
The Indian rupee has recovered to around 94.50 against the US dollar after hitting a record low of nearly 97 on May 20, making it one of Asia’s best-performing currencies in June.
Government should wait for stability, says former ambassador
Former Indian ambassador Anil Trigunayat, who has served in several Middle Eastern countries, said he understands why consumers want fuel prices to fall quickly. “As a consumer I would have liked that to happen yesterday,” he said. “But as a geopolitical analyst, facts on the ground dictate rationality — we are in the midst of an uncertain future, and all is not well in the Strait of Hormuz.”
Trigunayat praised the government for protecting consumers and businesses by absorbing much of the extra cost while carefully managing fuel prices. He believes it would be wiser to wait until the crisis is fully over before making permanent price cuts.
He added that during the conflict and the temporary closure of the Strait of Hormuz, India expanded its crude oil imports to more than 40 countries, including the US, Venezuela, Argentina, Brazil, Russia and several African nations.
Earlier, India’s crude basket had climbed from the low $70s to as high as $120-126 a barrel during parts of the crisis. LNG prices jumped 46%, while war-risk insurance and shipping costs also increased.
However, he refused to predict when fuel prices would actually come down. The former IFS officer said trusting the petroleum minister’s statement that prices will fall is reasonable, but “hoping that it will happen tomorrow is unreal.
