10 September 2026 (Navroze Bureau) : India’s state-owned oil marketing companies (OMCs) could face significant under-recoveries on petrol and diesel as Brent crude oil prices cross $100 a barrel, raising concerns over fuel-marketing margins and the potential pressure on domestic pump prices.
The widening gap between international crude costs and retail fuel prices could leave OMCs absorbing part of the increase if domestic petrol and diesel prices remain unchanged.
Petrol Loss Could Reach ₹5 Per Litre
According to industry estimates, OMCs could be losing around ₹5 per litre on petrol at current crude-price levels.
The potential under-recovery reflects the sharp rise in global oil prices, particularly as geopolitical tensions in West Asia disrupt energy markets and increase concerns over supplies.
Diesel Faces Much Larger Under-Recovery
The impact is considerably greater for diesel.
OMCs could face an estimated ₹23 per litre loss on diesel, making the fuel significantly more challenging to market at existing retail prices if crude remains above $100 a barrel.
Diesel is widely used by transport operators, agriculture, industry and commercial fleets, meaning any sustained increase in its underlying cost can have broader economic consequences.
Brent Crosses $100
Brent crude has moved above the psychologically important $100-a-barrel mark amid escalating tensions in West Asia.
Oil markets typically respond sharply to concerns over supply disruptions, particularly when they involve major shipping routes or oil-producing regions.
The latest surge has therefore increased pressure on countries such as India, which imports the majority of its crude oil requirements.
Why OMC Margins Are Under Pressure
Petrol and diesel prices in India do not automatically move every day in line with international crude prices.
When global crude rises rapidly but domestic pump prices remain unchanged, the difference between the cost of procuring fuel and the retail price can squeeze OMC margins.
If the situation persists, companies may either absorb the losses, reduce marketing margins or eventually seek higher retail prices, depending on government policy and market conditions.
West Asia Conflict Adds to Oil Risks
The latest crude-price surge comes against the backdrop of the continuing West Asia conflict.
Concerns over attacks, shipping disruptions and the security of critical energy routes have increased the risk premium in crude prices.
The Strait of Hormuz is particularly important because it is a major route for global oil and gas shipments. Any prolonged disruption could push international prices substantially higher.
India Remains Vulnerable to Global Oil Prices
India imports a large share of the crude oil it consumes, making the domestic economy sensitive to international oil-price movements.
Higher crude prices can increase the country’s import bill and put pressure on the rupee, inflation and the current account.
For OMCs, higher crude prices also raise the cost of producing and importing petroleum products.
Could Petrol and Diesel Prices Rise?
The estimated losses have renewed questions over whether domestic fuel prices could eventually be revised.
However, the actual impact on consumers will depend on several factors, including how long crude prices remain elevated, exchange-rate movements, government policy and decisions taken by oil companies.
A temporary spike in crude prices does not necessarily translate immediately into an equivalent increase at petrol pumps.
Diesel Could Have a Wider Economic Impact
A sustained increase in diesel costs could have a particularly broad effect because diesel is deeply embedded in India’s logistics and production economy.
Higher diesel prices can increase freight costs, raising the expenses involved in transporting food, manufactured goods and raw materials.
This can eventually feed into prices across different parts of the economy.
Government Faces a Policy Challenge
The sharp increase in OMC under-recoveries could create a difficult policy choice.
Keeping pump prices unchanged would protect consumers from an immediate fuel-price shock but could increase pressure on OMC finances. Passing higher costs on to consumers, meanwhile, could contribute to inflation and raise transportation expenses.
The government’s approach will therefore remain important if crude prices stay above $100 for an extended period.