Auto-fuel price hikes in India now appear less a matter of political timing than of economic arithmetic.
The pressures have been building quietly for months, hidden behind a deceptively simple number: the price of crude oil.
Even without a full-scale war in West Asia, analysts increasingly expect global crude prices to average between USD 95 and USD 105 a barrel in 2026, sharply higher than the roughly USD 65-70 average seen in the year before.
While the Reserve Bank of India had projected India’s crude basket at about USD 85 this year, the cost of the actual average price of India’s crude oil purchases climbed to USD 114.48 a barrel last month.
“It is unlikely that the average price for India’s crude purchases is going to go below USD 100 in the first half of this year,” said Amit Bannerjee, an independent merchant banker.
India imports more than 85 per cent of its crude oil, and every USD 10 rise in crude prices inflates India’s annual import bill by roughly USD 1.5-2 billion.
Last month, the Central government had slashed excise duties by Rs 10 a litre for petrol and diesel in a bid to cushion the effect of keeping pump prices stable. However, the give-away by the government cannot be sustained forever, nor can oil companies bear the higher cost of crude and sell at a lower pump price forever.
Oil marketing companies have a combined notional loss of Rs 1 lakh crore for the ten months when prices have been going haywire because of the war, said petroleum ministry officials.
“The end of the election cycle may remove one political restraint on fuel price revisions, but the deeper reality is that the economics are becoming harder to ignore. Oil marketing companies cannot indefinitely absorb losses, nor can the government continue underwriting price stability without straining public finances,” said Prof Biswajit Dhar, former WTO chair at the Indian Institute of Foreign Trade.
Prime Minister Narendra Modi appeared to acknowledge that broader vulnerability even before the latest escalation in West Asia. Speaking at an event in Hyderabad on Sunday, as fears of conflict began spreading across the region, he urged Indians to reduce “avoidable imports” and conserve energy.
Modi had extended the appeal beyond fuel, touching another deeply ingrained Indian instinct: the purchase and hoarding of gold.
India last year spent roughly USD 72 billion on gold imports, making the metal not merely a cultural obsession but a major economic variable.
Gold occupies a peculiar position in India’s economy — part household savings instrument, part luxury consumption, part strategic reserve asset.
The Reserve Bank of India has itself been aggressively accumulating gold, raising its holdings to 880 tonnes by March 2026.
Gold now constitutes nearly 16.7 per cent of India’s foreign exchange reserves, up from around 11.7 per cent a year earlier.
In ordinary times, the Indian household’s appetite for gold is viewed as a cultural constant. In periods of global uncertainty, however, it becomes part of a broader macroeconomic challenge confronting policymakers already struggling with expensive energy imports, volatile commodity prices, and geopolitical instability.
For India, the warning signs are converging in uncomfortable ways. Oil drains foreign exchange. Gold absorbs it.
The dollar, which was Rs 85.41 a year ago, now sells for 95.24 and is forecast to touch Rs 100 to the dollar within weeks if trends continue the way they are playing out now.
Jayanta Roy Chowdhury
