Premium fuel price hike signals political balancing act amid global oil surge

Earlier this week, official government sources said that despite a surge in global fuel costs amid the persisting West Asia crisis, prices of petrol and diesel in India were unlikely to increase. On Friday, however, oil marketing companies (OMCs) hiked premium petrol prices with immediate effect. Despite global energy disruptions, no change was made to the price of regular petrol.

Political analysts see the increase in premium fuel prices as a way to manage rising costs without triggering public outcry ahead of key elections in four states and a Union Territory. At the same time, even though the hike is limited to premium fuel variants, it reflects underlying economic and geopolitical pressures on the companies.

Advertisement

“By raising prices of high-octane variants while freezing regular petrol and diesel, the government is attempting a balancing act between fiscal realities and political considerations,” they say.

With Brent crude crossing $100 per barrel and no sign of an end to the Iran–Israel conflict, the move indicates that OMCs’ options are narrowing. India imports nearly 90% of its oil, and keeping prices stagnant is becoming increasingly difficult.

However, a blanket hike would have led to a spike in wholesale inflation, raising the cost of essentials—vegetables, milk, and transport—and, with major Assembly elections around the corner, it was clearly not an option.

While India officially has deregulated fuel prices, they are often kept artificially stable during election periods. Notably, fuel prices have remained largely unchanged for the past two years, since 2024.

“The fact is, no political party, including the BJP, can afford the repercussions of a general price hike at this time. Increasing premium fuel prices allows companies to recover some costs from those who can afford to pay, while avoiding unrest among the middle class. However, today’s increase is also a warning that if geopolitical tensions do not ease soon, more severe measures may be required,” they add.