Petrol diesel prices up despite recent global oil drop:Experts decode what’s behind the inverse relation

Fuel prices in India have gone up again. This is the fourth time prices have increased in the last 11 days. On Monday, 25 May, 2026, state-run oil companies raised petrol prices by up to ₹2.61 per litre and diesel by ₹2.71 per litre. With this latest increase, petrol in Delhi has crossed the ₹100 mark for the first time in four years, now selling at ₹102.12 per litre. Diesel in Delhi has reached ₹95.20 per litre. In Mumbai, petrol is even higher at ₹111.21 per litre. This price rise is confusing to many people. Why are fuel prices going up in India when global Brent crude oil prices have actually fallen below $100 a barrel from their recent high of $126? Why the opposite pattern? According to experts, there are two main reasons for the opposite direction of global oil and domestic retail prices of fuel. 1. Making up for under-recovery on sale of fuel During the peak of the US-Iran conflict, global oil prices jumped by about 80%. However, Indian oil companies did not revise petrol and diesel prices for weeks to protect consumers. Because the companies kept prices steady while buying expensive oil from abroad, these companies sold fuel at under-recovery. According to Professor Venkatesh Athreya from Bharathidasan University, oil companies were losing ₹10 to ₹14 on every litre of petrol and ₹25 to ₹30 on every litre of diesel sold. Now that global prices have softened, the Indian oil companies have raised domestic prices to recover those past losses and keep their businesses running. How India determines fuel prices? India uses a system called ‘Daily Dynamic Pricing.’ In simple terms, petrol and diesel prices are supposed to change every morning at 6:00 AM based on two main factors: The Price of International Crude Oil: The cost of buying raw oil from world markets. The US Dollar Exchange Rate: India buys oil in US dollars. If the Indian rupee becomes weaker against the dollar, then India has to pay more rupees for the same amount of oil. Additionally, central and state government taxes, along with dealer commissions, are added to this base cost to decide the final retail price. However, as seen recently, oil companies sometimes pause these daily changes during highly volatile periods. What is the Current Average Price of India’s Crude Oil Basket? India does not just buy Brent crude; it buys a mix of different types of oil, mostly from different countries. This mix is called ‘India’s Crude Oil Basket.’ For the month of May 2026, India’s crude oil basket has averaged $107.96 per barrel. 2. Time lag factor: Even though Brent crude futures dropped to around $98.59 per barrel on Monday morning due to developments emanating from the US-Iran peace deal, India’s actual basket price stays higher. This is because India is still processing the actual, physical oil shipments that it bought at panic-high prices during the peak of the conflict, alongside paying heavy war-risk shipping fees to cross the volatile Strait of Hormuz. Past instances of the inverse pattern This is not the first time we have noticed opposite directions of prices of global crude oil and domestic retail prices. It has happened in the past for similar reasons: When you look past the macroeconomics, this pricing disconnect isn’t just a financial anomaly—it’s a daily struggle for families at the grassroots level. -S.Ravi ( Former BSE Chaiman, Founder Ravi Rajan and Company The 2022 Russia-Ukraine Conflict: In early 2022, global crude oil prices spiked heavily and then began to fall. However, Indian oil companies kept prices frozen for months due to local state elections. Once the freeze ended, fuel prices in India were increased rapidly to make up for the losses at that time when global oil prices actually began to cool down. While, during Russia invasion of Ukraine, oil prices had jumped to an average of more than $100 per barrel in 2022. The average price of India’s import of crude oil in financial year 2023 stood at $93.15 per barrel. The 2020 COVID-19 Pandemic Period: In 2020, global oil prices crashed heavily during the lockdown. Instead of cutting petrol and diesel prices for consumers, the Indian government heavily increased central excise taxes on fuel. As a result, domestic fuel prices either stayed the same or actually went up, despite global crude oil hitting historic lows. During the Covid-19 pandemic, the Brent crude prices averaged $42 per barrel in 2020. During that financial year of 2020-21, India imported oil at an average price of $44.82 per barrel. The 2026 Iran War: During the 2026 Iran war, the global oil prices skyrocketed to as high as $126 per barrel. Initially, the government held on to the rates due to state elections, but once the polls got over, the oil companies quickly jumped on to the rate-hiring spree hiking the prices by about ₹7.5 per litre within a span of just two weeks. During the 2026 Iran war, the Brent crude prices averaged $107 per barrel. During the first two months of the financial year of 2026-27, India imported oil at an average price of $111.16 per barrel.