Fuel Price Cut Unlikely Amid Middle East Tensions: Report

Rising tensions in the Middle East have caused a sharp increase in crude oil prices, severely impacting global oil supply. As a result, any hope for a reduction in fuel prices seems unlikely. Earlier, oil marketing companies (OMCs) were considering slashing fuel prices ahead of upcoming elections and the festive season, but recent developments have changed the outlook.

Impact of Middle East Conflict on Fuel Prices

According to government officials, crude oil prices have surged by more than 5% this week alone, making it difficult to reduce fuel prices in the near future. Brent crude prices have risen significantly, adding pressure to the supply chain.

Last month, Brent crude was at a near three-year low, and discussions were underway to pass on the benefits to Indian consumers through reduced fuel prices. However, the situation has now reversed. Despite the completion of elections in Jammu & Kashmir and upcoming elections in Haryana, fuel prices have remained unchanged.

Expert Opinions

Vinod Nair, Head of Research at Geojit Financial Services, stated, “The spike in oil prices due to mounting Middle East tensions may increase input cost inflation, impacting earnings visibility for domestic companies.”
Trivesh D, COO of Tradejini, remarked, “Rising oil prices could put pressure on India’s fiscal deficit, forcing the government to reallocate funds from key infrastructure or public welfare projects to cover higher costs.”

Impact on India

The conflict between Iran and Israel has caused crude oil prices to surge by $7 per barrel in just a week. The Indian crude basket, a mix of imported crude oil, rose by about $3 per barrel, reaching $75.22 on October 3, up from $72 at the end of September.
OMCs had already announced a Rs 48.50 price hike for 19-kg commercial LPG cylinders earlier this month, citing the ongoing Middle East crisis as one of the major factors. OMC margins have yet to recover fully.

Goldman Sachs has predicted a $20 per barrel price increase if Iran’s oil supply is severely affected. Similarly, Citigroup Inc. warned that a major attack on Iran’s oil infrastructure could lead to a 1.5 million barrel per day reduction in global supply.

Shares of Indian OMCs such as Indian Oil Corp, Bharat Petroleum, and Hindustan Petroleum have dropped in response to the surging crude oil prices. The uncertainty surrounding the conflict and its potential impact on global oil supply continues to cast a shadow on the market.

Aakhir Tak Editor-in-Chief

See Full Bio