India has effectively reduced the adverse effects of the global oil crisis, particularly amid the ongoing conflicts involving the US and Iran. Although domestic prices for petrol and diesel have risen, the increases have been less severe relative to the extreme fluctuations observed in international crude prices. Recent shifts in international market dynamics have seen crude oil prices fall unexpectedly, particularly after US President Donald Trump refrained from further military actions against Iran. Despite this, uncertainty surrounding negotiations and the vital Strait of Hormuz continues to impact market stability.

India’s heavy reliance on imported crude oil exposes it to fluctuations in global prices and potential supply disruptions. While domestic prices for fuel have escalated, the country has implemented measures to prevent the full brunt of the price surge from adversely affecting consumers directly.

To cushion the blow, India has employed a multifaceted approach that includes diversifying crude oil suppliers, decreasing fuel taxes, and maintaining strategic oil reserves. Importantly, the government has worked to stabilise the rupee to further mitigate the economic strain on consumers.

Diversification of Crude Oil Supply Sources

A key response to the crisis was India’s prioritisation of diversifying its sources of crude oil. Before the onset of the conflict, India sourced a majority of its crude from the Middle East, particularly through the critical Strait of Hormuz. Challenges emerged due to potential disruptions in this crucial waterway. Consequently, India adapted by sourcing crude from a broader array of countries, including significant supplies from Russia, the US, and other less conventional suppliers such as Belgium and Greece.

According to Dr VP Singh, an academic at Great Lakes, Gurgaon, the diversification effort has proven effective, with Russian oil constituting a growing share of India’s imports, escalating from 38 per cent in April to over 54 per cent in July 2026. This variation in sourcing mitigates the risk of supply crises during periods of heightened geopolitical tensions.

While such diversification cannot fully shield India from rising global prices, it does provide a buffer against potential shortages. This strategy has proven essential in managing India’s domestic fuel supply amidst increasing global demand and instability.

Government Interventions to Stabilise Prices

In addition to diversifying sources, the Indian government has intervened in the market through fiscal measures. One of the significant steps was the excise duty reduction implemented on March 27, 2026. This involved cutting excise tax on petrol and diesel by Rs 10 per litre amid soaring international crude oil prices, which had surged from approximately $70 to around $122 per barrel due to the crisis.

Although consumers did not experience a direct price drop at the retail level, the government’s tax reduction allowed for some subsidisation of state-owned oil marketing companies. The companies faced pressures to sell below their cost, thus using the tax cut to offset some financial losses. This temporary measure provided consumers with some relief during a turbulent period in the oil market.

Furthermore, oil marketing companies also played a role in absorbing some of the costs associated with rising international crude prices, thereby postponing immediate price hikes for consumers. However, the relief offered through these mechanisms is not a permanent solution, and future adjustments may be necessary if crude prices remain elevated for extended periods.

Strategic Reserves and Export Controls

India maintains strategic petroleum reserves as an emergency measure, currently housing approximately 5.33 million tonnes of crude across various facilities. These reserves can act as a strategic buffer in times of supply disruptions. Additionally, the government has placed export duties on refined products like petrol and diesel to discourage external sales during the crisis, thereby ensuring sufficient domestic supply.

As of August 3, 2026, the government implemented enhanced export levies, significantly raising taxes on diesel exports to Rs 24 per litre. This policy aims to balance domestic availability against lucrative export opportunities, particularly useful when international prices rise sharply.

Through these interventions, India aims not only to stretch its strategic reserves but also to ensure that consumer demand is met without excessive reliance on volatile international markets. Given these multifaceted strategies, India is better equipped to navigate the challenges posed by ongoing global oil price fluctuations.

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