Ever wondered why your fuel bill doesn’t shrink when global oil prices plummet? You’re not alone in this frustration. Despite crude oil prices falling significantly—Brent crude recently dropped below $70 per barrel for the first time since December 2021—consumers worldwide continue to face stubbornly high petrol prices at the pump.
The Great Disconnect: Crude vs. Pump Prices
The relationship between crude oil and petrol prices isn’t as straightforward as many assume. Crude oil prices have dropped by nearly 24% over the last decade, yet petrol prices in India have increased by 30%, highlighting a fundamental disconnect that leaves consumers paying more despite global market trends.
This phenomenon isn’t unique to any single country. The core issue lies in understanding that consumers pay for refined fuel, not crude oil, and multiple factors beyond raw material costs determine what you see on the price board at petrol stations.
Russian Oil Discounts & Their Impact on Market Prices
Recently, Russia has reportedly reduced prices for Indian buyers, offering a discount of about $3–4 per barrel for crude exports .
Read More: Who Truly Benefits from India’s Purchase of Russian Oil — The Public or Ambani?
Assuming this applies similarly to Brent, the discounted price India might be paying would be roughly $65–$66 per barrel. However, this applies to the price at which India directly purchases Russian crude—not the global spot market.
Thus:
- Global crude prices remain near $69 (Brent) and $65 (WTI).
- India likely pays around $65–66 per barrel for Russian crude, factoring in the discount.
The Tax Factor: Government’s Hidden Revenue Stream
One of the most significant contributors to high petrol prices is government taxation. In India, for instance, Oil Minister Hardeep Singh Puri recently highlighted a difference of Rs 10-12 per litre between BJP-ruled and Opposition-ruled states, primarily due to varying state tax structures.
The government has been strategically using oil price volatility to manage revenue. When crude prices drop, authorities often increase excise duties to shore up government revenue, effectively preventing consumers from benefiting from lower global oil costs.
Political Voices Raising Concerns
Senior Congress leader P. Chidambaram has been particularly vocal about this issue, questioning why fuel prices remain high despite crude oil falling by USD 10.31 per barrel (14.37%) since January 2025. Currently trading at USD 64.62 per barrel, crude oil is significantly lower than its historic high of USD 147.27 per barrel in July 2008.
Chidambaram criticized the government’s decision to hike LPG cylinder prices by Rs 50 and impose additional excise duties on petrol and diesel during a period of declining global oil prices, calling for greater media scrutiny of government explanations.
Similarly, Trinamool Congress leader Derek O’Brien has pointed out that windfall profits of oil companies are not being passed on to consumers, despite the favorable crude oil environment.
Expert Insights: The Complex Pricing Matrix
Petroleum sector experts explain that fuel pricing involves multiple components beyond crude oil costs:
1. Refining and Distribution Costs
Refinery outages and rising shipping costs directly affect final prices, regardless of crude oil trends. The transformation from crude oil to usable petrol involves significant processing expenses that don’t fluctuate with raw material prices.
2. Exchange Rate Impact
Since petrol is traded in US dollars, currency fluctuations significantly impact local pricing. Even with stable crude oil prices, a weaker local currency can increase fuel costs for importing nations.
3. Supply and Demand Dynamics
High demand periods like holidays often lead to temporary price hikes, while seasonal variations and market speculation can cause price volatility independent of crude oil trends.
Government’s Balancing Act
Pankaj Jain, Secretary at the Ministry of Petroleum and Natural Gas, has indicated that oil companies could consider reducing fuel prices if crude oil costs stay at lower levels for a prolonged period. This suggests a wait-and-see approach rather than immediate price adjustments.
The government has occasionally provided relief—in March, ahead of key elections, authorities asked state-owned oil companies to reduce petrol and diesel prices by Rs 2 per litre. However, such decisions appear more politically motivated than market-driven.
Read More: US Presses Europe to Impose Tariffs on India Over Russian Oil Purchases
The Global Perspective
Energy experts warn that oil prices may fluctuate significantly, with potential spikes to $120 or even $150-200 per barrel during supply disruptions. This uncertainty makes oil companies and governments hesitant to pass on temporary price benefits to consumers.
Former NITI Aayog Vice Chairman Rajiv Kumar believes it’s an opportune time for oil companies to cut prices to reduce headline inflation and boost consumption demand. He argues that fuel prices affect all other prices, similar to interest rate changes.
What This Means for Consumers
The harsh reality is that retail fuel prices are influenced by factors far beyond crude oil costs. Government policies, taxation structures, currency fluctuations, and corporate profit margins all play crucial roles in determining pump prices.
Market competition and location also matter significantly. Urban areas with multiple petrol stations typically offer more competitive pricing than remote locations with limited options.
Looking Ahead: Reasons for Cautious Optimism
There are some positive indicators on the horizon. Global crude oil prices have dropped to three-year lows due to slowing economic growth and reduced fuel demand. If these trends continue, oil marketing companies may eventually pass benefits to consumers through price cuts.
However, experts caution against expecting immediate relief. The energy transition toward cleaner fuels and ongoing geopolitical uncertainties continue to create market volatility that affects long-term pricing strategies.
The Bottom Line
While it’s frustrating to see minimal changes in fuel prices despite dropping crude oil costs, understanding the complex factors involved helps set realistic expectations. Government taxation, refining costs, currency fluctuations, and corporate profit margins all contribute to the final price you pay.
The key takeaway? Crude oil prices are just one piece of a much larger puzzle. Until governments prioritize passing through crude oil price benefits and oil companies face genuine competitive pressure, consumers may continue experiencing this disconnect between global oil markets and local pump prices.
For now, the best strategy is staying informed about these market dynamics while advocating for transparent pricing policies that truly reflect global commodity trends.
