Fuel price hikes again as India’s oil shock moves downstream

India’s largest state-run fuel retailer, Indian Oil Corporation, hiked the price of the 19-kg commercial-use LPG cylinder by INR 42 (USD 0.4) today, a 1.4% increase, Reuters reports. This follows a massive 47.8% single-day hike of INR 993 (USD 10.4) implemented in May after major supply shortages.

Businesses bear the war’s brunt: The revision applies to commercial users — restaurants, hotels, and small businesses — that rely heavily on cooking gas for daily operations. Unlike household LPG, commercial cylinders have seen more frequent price adjustments as fuel retailers attempt to recover mounting losses from soaring global energy prices.

Why it matters: India’s three state-run fuel retailers — Indian Oil, Bharat Petroleum, and Hindustan Petroleum — typically move fuel prices in tandem. With 90% of India’s LPG imports originating from the Gulf, the government insulated households by freezing domestic cylinder rates, while energy majors passed additional costs on to industrial buyers.

Delhi CNG prices soar again

Consumers in New Delhi will pay more for compressed natural gas (CNG) after prices were hiked by INR 2 per kg last week — the fourth increase in less than 11 days, Business Standard reports. This brings the total price increase to INR 6 per kg, a 7.7% surge since 15 May.

What is CNG used for? In India, CNG is the cheaper and cleaner fuel alternative to petrol and diesel, mandated for urban transport, including public buses, rickshaws, and commercial taxi fleets, to curb pollution. City gas distribution networks that supply this market consume over 13.5 bn cbm of natural gas annually, making transport-led gas consumption the second-largest and fastest-growing energy segment in the country.

Why it matters: Because diesel fuels the primary national freight and CNG anchors urban transportation networks, this sudden cost transfer will immediately compress operating margins for FMCG, manufacturing, and e-commerce networks.

Fuel inflation accelerates: This accompanies the fourth round of pump price hikes. Combined increases since 15 May have pushed petrol and diesel prices up by nearly 8%, taking fuel costs to their highest levels since 2022.

Fuel export duties trimmed

The finance ministry of India will reduce export duties on gasoline, diesel, and aviation turbine fuel (ATF) for the fortnight beginning today, as per a finance ministry notification. Export duty on gasoline has been set at INR 1.5 per liter, diesel at INR 13.5, and ATF at INR 9.5 per liter. At the April peak, diesel export levies reached INR 55.5 per liter and ATF to INR 42 per liter. These numbers are reviewed every fortnight to reflect average global prices of crude oil and refined products. The finance ministry sharply hiked export duties in March to discourage private refiners from diverting fuel overseas when refining margins surged.

Heatwave exposes India’s gas crunch

India’s gas-fired power generation dipped to its lowest level in six years, as the Strait of Hormuz crisis disrupts fuel supplies, just as extreme summer temperatures drive electricity demand to record highs, Bloomberg reports.

LNG disruptions hit evening supply: Gas-based plants generated just 3.6 bn kWh of electricity between April and May 21, about two-thirds of output during the same period last year and roughly half of 2024 levels. While solar meets daytime demand, the grid lacks the gas capacity required to bridge the evening peak when solar output drops. This has triggered blackouts in New Delhi, Uttar Pradesh, and Tamil Nadu, disrupting manufacturing.

Why it matters: Peak power consumption reached an unprecedented 270.8 GW last week, with cooling demand surging across homes and businesses. India’s LNG imports plummeted 30% to 1.9 bn cbm in April — with imports from key Gulf suppliers such as Qatar and the UAE sharply declining on the back of the near-closure of Hormuz, a route that normally handles roughly a fifth of global LNG flows.

What’s next: With normal imports cut off, power stations are buying expensive spot fuel on the Indian Gas Exchange, but supply remains below par. Nighttime deficits are likely to persist as long as LNG shortages endure.

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