K. Raveendran

Motorists are facing the familiar squeeze of higher pump prices at a time when global crude markets remain volatile but not one-directional. Four increases in 11 days have revived the old grievance that oil companies in India move swiftly when crude rises but rarely show the same urgency when international prices retreat.

The latest cycle has arrived after elections, strengthening the perception that pricing discipline is shaped as much by political timing as by market arithmetic. Petrol and diesel prices have been lifted in several rounds, including a steep rise of about ?3 a litre after state polls and another increase on May 25, when petrol rose by ?2.61 a litre and diesel by ?2.71 a litre, marking the fourth rise in less than two weeks.

Global conditions do provide oil companies with a convenient justification. The confrontation involving the United States and Iran, tensions around the Strait of Hormuz, and uncertainty over Middle East supply routes have injected a significant risk premium into crude. Brent crude has swung sharply, rising on conflict fears and then easing as traders watched for signs of progress in talks.

On May 27, Brent fell to about $98.16 a barrel and West Texas Intermediate to about $92.23 after a strong rally the previous day, showing that traders are still pricing both danger and diplomacy rather than assuming a prolonged supply shock.

That guarded response is important. International markets are not ignoring the geopolitical crisis; they are discounting it with caution. Oil traders remember that headline shocks can fade quickly if tankers keep moving, negotiations resume, or major producers signal enough spare capacity to calm buyers. Even when prices spike, they can reverse as fast as they rose.

This is the central difference between the behaviour of global markets and the experience of consumers in India. International prices move both ways. Domestic pump prices, once raised, tend to acquire a stickiness that is difficult to justify purely on the basis of crude costs.

Oil marketing companies argue that they are only passing on higher import costs, accumulated losses and currency pressures. That argument has some merit. India imports most of its crude requirement, and a weaker rupee magnifies every dollar increase in oil. Refining, freight, insurance and inventory costs also matter.

When crude prices stay elevated for a sustained period, companies cannot indefinitely absorb the increase without affecting their balance sheets. State-run oil retailers have often been asked to hold prices steady during politically sensitive periods, effectively bearing the cost until elections pass or fiscal space opens for adjustment.

Yet the public complaint is not only about price increases. It is about asymmetry. Consumers are asked to accept “market-linked” pricing when costs rise, but they see limited evidence of the same principle when crude softens. This pattern creates distrust. If pump prices are meant to reflect international benchmarks, downward adjustments should be visible when crude eases.

If prices are being managed for fiscal or political reasons, that too should be acknowledged. The present round of increases has therefore become more than a fuel-price issue; it has become a test of transparency in administered market behaviour.

The timing has sharpened the political economy of the issue. Post-election hikes are not new in India. When retail prices are held steady through campaign periods and revised afterwards, households conclude that the burden has merely been deferred. The immediate hit is felt across income groups, but the pain is uneven.

Middle-class commuters pay more at petrol pumps, transport operators face higher diesel bills, and small businesses see logistics costs rise. For low-income households, the impact arrives indirectly through vegetables, milk, bus fares and manufactured goods. Diesel remains deeply embedded in the cost structure of the economy.

Inflation is the wider risk. Fuel prices do not operate in isolation. Higher diesel costs feed into freight rates, which influence wholesale and retail prices across supply chains. If the increase is absorbed by businesses, margins shrink.

If passed on, consumers pay. A short-lived crude spike may not be enough to disturb inflation expectations, but repeated domestic fuel hikes can do so even when global prices later moderate. The concern is not merely that petrol and diesel have become costlier; it is that the costlier fuel may reset price behaviour across sectors already coping with uneven demand.

There is also a fiscal dimension that is often understated. Central and state taxes form a substantial part of the retail price of petrol and diesel. This means governments have policy room to cushion consumers, but using that room affects revenue. Excise and value-added taxes on fuel are attractive because they are easy to collect and difficult to evade.

During periods of high crude, however, the same tax structure magnifies the public burden. Oil companies may be blamed for every increase, but governments remain central players in deciding whether global volatility is fully passed through or partially absorbed.

The geopolitical backdrop remains serious. The Strait of Hormuz is one of the world’s most sensitive energy chokepoints, and any threat to flows through the waterway can quickly unsettle oil and gas markets. Reports of renewed military action, accusations over ceasefire breaches and uncertainty surrounding US-Iran talks have left traders cautious.

At the same time, signs that some energy traffic has continued and that negotiations may still produce an agreement have prevented a full panic. This is why the international market has looked nervous but not disorderly. Prices are elevated, but they are not behaving as if a lasting blockade is already inevitable.

India’s domestic response should therefore be calibrated rather than opportunistic. If global oil is genuinely entering a sustained high-price phase, staggered increases may be unavoidable. But if prices are reacting to headlines and then retreating, companies should avoid locking consumers into increases based on the peak of each panic.

A credible mechanism would smooth volatility in both directions, preventing sudden spikes while ensuring that consumers benefit when the international market cools. Without such balance, “market pricing” becomes a one-way doctrine that protects company revenues while transferring risk to households.

Public behaviour already shows how sensitive consumers are to fuel-price signals. Reports from Maharashtra indicated panic buying and stockpiling fears after price increases, with petrol and diesel sales jumping sharply in several districts.

Such reactions are not merely irrational consumer anxiety; they reflect a belief that prices may keep rising and that relief is unlikely even if crude eases. Once that belief takes hold, it can create distortions of its own, from temporary shortages at pumps to avoidable pressure on local supply chains. (IPA Service)