India's $120 Crude Squeeze Hits Fuel Retailers, Import Bill and Government Finances

A costly oil shock reaches across the economy

India's crude oil basket averaged $120.08 a barrel in October 2026 through the latest available daily prices, putting the country's main oil import benchmark near its highest level in almost 15 years. The increase is squeezing fuel retailers, swelling the import bill and raising the cost of government support for consumers and farmers.

The Petroleum Planning and Analysis Cell's crude price data, updated on October 23, put the basket at $119.99 a barrel on October 22. The October average approaches the $123.61 recorded in March 2012, the historical comparison behind the nearly 15 year high.

India spent $90.6 billion importing crude during April through September, compared with $61.9 billion a year earlier. Yet the quantity purchased barely changed, rising from 121.8 million tonnes to 122.7 million tonnes. The country paid about $28.7 billion more for only 0.7% more oil.

Consumers have been partly protected because domestic fuel prices have risen less than international costs. Oil marketing companies still face losses on fuel sales despite retail price increases in May. Meanwhile, higher fertiliser costs are adding another demand on the central government's budget.

Axis Bank Research estimates that the Centre, states, public sector companies and the Reserve Bank of India together could absorb support equivalent to 1.7% of gross domestic product, assuming crude averages $100 a barrel over the year. October's price is already about $20 above that assumption, making the duration of the shock a central concern.

How quickly did the Indian basket climb?

PPAC's monthly figures show a sharp reversal after oil became cheaper during the early summer. The Indian basket fell from $114.48 in April to $82.04 in July, before climbing to $116.09 in September and $120.08 in October so far. October's average is about 46% above July's.

The basket combines prices for sweet crude, represented by Brent Dated, and sour crude, represented by Oman and Dubai grades. Sweet and sour describe differences in sulphur content, which affect how refineries process the oil. PPAC lists October's sweet to sour composition ratio as 65.27 to 34.73.

• April 2026: The Indian basket averaged $114.48 a barrel.
• May through July: The average fell to $106.23, then $83.22 and $82.04.
• August and September: Prices recovered to $90.19 and $116.09.
• October 22: The daily basket price stood at $119.99.
• October 23: PPAC's updated table showed an October average of $120.08 so far.

A reported October average of $121.25 was also in circulation; PPAC's October 23 table gives the dated official figure of $120.08. The month was still under way, so the official average could change with subsequent daily prices.

Brent futures reached an intraday high of $114.94 on Friday, October 23, following renewed attacks on Saudi Arabia's civilian and energy infrastructure. Brent futures and India's basket measure different combinations of oil prices, so their quoted values can move at different levels.

Why the import bill is growing faster than demand

September's crude import bill reached $15.4 billion, about 47% above a year earlier, according to PPAC figures. Imports increased by about 7% to 21.7 million tonnes from 20.3 million tonnes. The Indian basket averaged $116.09 that month, compared with $69.61 in September 2025.

India imports more than 85% of its crude requirements, and crude accounts for around one fifth of its merchandise import bill. That dependence means a price increase can raise spending sharply even when factories, vehicles and households use little additional fuel.

At annual imports of roughly 1.8 billion to 2 billion barrels, a sustained increase of $1 a barrel can add approximately $2 billion to the yearly crude bill. The eventual cost also depends on purchase volumes and the prices India actually pays.

India's net oil and gas bill, which subtracts earnings from petroleum product exports from energy import spending, rose nearly 40% to $13.4 billion in September. During April through September, it increased 35% to $81.1 billion. September LNG imports cost $1.2 billion, while petroleum product exports earned $4.8 billion.

Higher net energy spending can widen the current account deficit, the gap between a country's external payments and receipts across trade, services and income. India must find more foreign currency to pay for energy unless stronger exports or other receipts cover the increase.

More oil is flowing, but delivery remains expensive

West Asian crude exports excluding Iran have recovered to more than 90% of their levels before the conflict, according to Jefferies. Physical crude premiums, the extra amount paid above a benchmark for actual cargoes, fell 65% over a week to $9 a barrel.

Shipping costs have stayed high even as supplies recovered. Goldman Sachs estimates that crude freight rose from around $3 a barrel a year earlier to more than $20. Jefferies puts freight at roughly eight times its level before the conflict and more than 25% of landed crude costs, compared with about 3% previously. The estimates use different comparison periods, but both show a steep rise in transport costs.

Goldman Sachs assigns about $7 a barrel of freight costs to the war risk around the Strait of Hormuz, $4 to transfers between ships, $4 to higher vessel fuel costs, $3 to rerouting and tanker inefficiencies, and $2 to Iran's sidelined fleet. Singapore marine fuel prices rose from $428 to $919 a tonne, more than doubling a major operating expense.

The Strait of Hormuz connects Gulf producers with international shipping routes. Disruptions there, alongside threats around Bab-el-Mandeb between the Red Sea and Gulf of Aden, have made moving energy more difficult and expensive. Landed cost includes delivery expenses as well as the oil itself, explaining why recovering supplies have brought limited relief.

Fuel retailers absorb losses as revenue rises

Jefferies estimates petrol and diesel marketing losses at Rs 28 and Rs 34 a litre respectively, using pricing averaged over 15 days. Its calculation assumes procurement costs corresponding to an Indian crude basket of about $120 a barrel.

A marketing loss arises when the amount a company receives from selling fuel falls short of the relevant cost of supplying it. Refining and retailing are different activities: a company can earn money processing crude while losing money selling petrol or diesel at restrained domestic prices.

Bharat Petroleum Corporation Limited's results illustrate the pressure. Consolidated net profit in the second quarter of FY27 fell 21% from a year earlier to Rs 4,863.05 crore, even as revenue rose 29.7% to Rs 1.57 lakh crore. Higher sales revenue therefore came alongside lower earnings.

During April through September, BPCL's consolidated profit fell 77% to Rs 2,990.35 crore from Rs 13,030.51 crore a year earlier. The company attributed pressure on marketing margins to crude above $100 a barrel amid the West Asia war. Its board also approved a new subsidiary for the Andhra refinery, keeping a major expansion plan moving during the earnings squeeze.

Who pays for protecting consumers?

Axis Bank Research's October 23 assessment divides the estimated public sector support burden into three parts. The Centre accounts for 0.8% of GDP through measures including fuel excise cuts, fertiliser subsidies and restrained increases in domestic cooking gas prices.

Oil marketing companies and state governments account for a further 0.7% of GDP through marketing losses and lower value added tax receipts. The RBI accounts for an estimated 0.2%, reflecting support associated with concessional foreign exchange swaps and currency intervention.

The combined 1.7% estimate covers support across several public institutions. Consumers pay less immediately, while government revenue, company profits and other public sector resources absorb more of the expense.

Axis estimates that each additional $10 a barrel raises the support burden by 20 basis points of GDP if retail fuel prices stay unchanged. A basis point is one hundredth of a percentage point, so 20 basis points equals 0.2% of GDP. Applying that sensitivity to a full year at $120 rather than $100 would imply about 0.4% of GDP in additional support.

Fertiliser and cooking gas add to budget pressure

Fertiliser subsidies increased 21% from a year earlier during April through August. If the current cost trajectory persists, the FY27 fertiliser subsidy bill could exceed its budget estimate by more than 76%. That is a conditional projection, with the eventual bill depending on prices, purchases and how long expensive energy persists.

Natural gas matters because it is an important input in producing fertilisers such as urea. Jefferies put spot LNG at $29 per million British thermal units, a standard measure of energy, up 12% over a week. European gas storage stood at 75%, compared with 83% a year earlier, adding pressure as winter approached.

Cooking gas creates another claim on public resources. Axis estimates FY27 LPG under-recoveries at Rs 57,000 crore. Under-recoveries describe the gap between the cost of supply and the amount recovered through sales under prevailing prices.

Axis also identifies possible fiscal buffers equivalent to 0.6% of GDP from higher gold duties, duties capturing windfall earnings on petroleum exports and the Economic Stabilisation Fund. Those resources could limit the Centre's fiscal slippage to 20 to 30 basis points of GDP, or 0.2 to 0.3 percentage points. The estimate depends on the oil price path and the support maintained.

Can refinery exports offset the damage?

Indian refiners have opportunities to earn more from a global diesel shortage. Jefferies puts Singapore gross refining margins at an average of $14 a barrel during FY27 so far. Gasoline, diesel and aviation fuel spreads stood at $26, $69 and $68 a barrel respectively. These spreads measure product prices against crude costs, before all operating expenses.

Kpler says Indian refineries have operated at more than 100% of rated utilisation, helped by relatively limited maintenance. Rated capacity is a reference level; plants can sometimes process more through operating improvements and changes in the crude they use.

Sumit Ritolia, Kpler's lead research analyst for refining and modeling, said access to competitively priced crude, including Russian barrels, supported refining economics. He also described how domestic pricing sustains diesel consumption:

Unlike many Western markets, where higher international oil prices are more directly passed through to consumers, India's retail diesel prices have remained largely unchanged despite elevated global prices.

Russia supplied 35% of India's crude imports in September. Russia, Iraq, Saudi Arabia, the UAE and Kuwait together supplied about 70%. A temporary US waiver of key duties linked to its Russia sanctions legislation, lasting 60 days, eased a potential pressure on major buyers of Russian crude.

Export earnings face limits, however. Petroleum products accounted for a provisional 10.9% of gross exports in September, the lowest share in four years, while petroleum export value fell 24.6% from a year earlier. Stronger domestic diesel use during October through December could leave fewer additional barrels available for overseas sales.

What changes for households and businesses?

Adani Total Gas has raised CNG prices by Rs 4.45 a kilogram, showing that some energy costs are already reaching consumers. Higher petrol and diesel costs can also raise expenses for freight operators, farmers, factories and shops, with some of those costs eventually entering the prices of goods.

No further nationwide petrol or diesel price increase was announced in the accounts available on October 23. The next three months matter because sustained crude prices near $120 would deepen the cost of holding domestic prices down, while cheaper oil and freight would ease that pressure.

Domestic diesel demand is expected to strengthen through October to December with industrial activity, mining, freight, agriculture and the festive and marriage season. A domestic refinery executive expected October diesel exports to maintain the intensity of the preceding three to four months, while rising local demand could constrain exports later in the quarter.

Energy companies will feel the shock differently. Jefferies estimates that average margins for polyethylene, polypropylene and polyethylene terephthalate were 68% above their levels at the end of February, supporting Reliance Industries' oil to chemicals business. Stronger earnings in those products offer some relief within the industry, while fuel retailers and government budgets continue to carry substantial costs.

Key Points

• India's crude basket averaged $120.08 a barrel in October through PPAC's latest update, close to its March 2012 level.
• The April through September crude import bill reached $90.6 billion, up from $61.9 billion, despite only a 0.7% increase in volume.
• Shipping costs remain elevated even though West Asian crude exports excluding Iran have recovered above 90% of their levels before the conflict.
• Jefferies estimates petrol and diesel marketing losses at Rs 28 and Rs 34 a litre.
• Axis estimates public sector support at 1.7% of GDP with annual crude averaging $100 a barrel, with higher prices increasing the burden.
• Fertiliser, cooking gas and LNG costs add pressure, while domestic diesel demand may limit the relief available from refinery exports.