Several countries, including the US, let retail prices rise in line with the increase in crude prices. In India, oil companies have so far kept pump prices unchanged and have taken a hit on their margins after pocketing gains for months. It is unlikely that the government, which has been raking in revenue, will make any changes until March 31 to ensure that taxes and fiscal balance are in line with budget targets.
With elections due in four states and the UT of Puducherry, the political green light is unlikely until the last phase of voting on April 29. In the US, gasoline prices were estimated at $3.7 a gallon on Monday, according to AAA data. Since the war broke out, benchmark Brent crude has seen an increase of over 40%, while Russian Urals crude has risen by over 50%.
The Indian basket — which comprises sour crude from Oman and Dubai, as well as the sweet grade of Brent Dated — was estimated at $70.9 a barrel on Feb 26 and rose to $127.2 on March 12, before climbing further to $142.69 on Monday, official data showed.
India was in a sweet spot for months, buying discounted Russian crude, whose prices have now increased. The spike is on account of a global scarcity caused by Iran blocking the Strait of Hormuz, which accounts for 20% of global oil and gas supply. For India, the impact is even greater, as the narrow channel supplies around 60% of the energy processed in the country.
Crude prices are expected to remain volatile until the movement of vessels from Hormuz is normalised. Brent rallied to a three-year high of $120 a barrel on March 9 but cooled later after International Energy Agency members decided to release 400 million barrels from emergency reserves to try to quell soaring prices. Axis Bank chief economist Neelkanth Mishra said if crude remains around $100 per barrel for a year, India’s import bill would rise sharply and hurt the trade balance by about $80 billion, or 2.1% of GDP.
In a recent report, ratings agency ICRA said prolonged conflict risks disruption of energy supplies and shipping routes, impacting India’s macroeconomic outlook and multiple sectors. It added that a $10 increase in the average price of crude oil for the year would raise the country’s current account deficit by 30–40 bps. Gita Gopinath, professor of economics at Harvard University, said higher crude prices will impact global economic growth. “If we are now looking at an average of $85 a barrel for 2026, then that could shave off around 0.3–0.4pp from global growth. Headline inflation could rise by 60 bps,” she posted.
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