State retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum implemented four rounds of price hikes since mid-May after holding off earlier due to elections. Gasoline prices are now 7.8% higher while those for diesel are up 8.6%.
Analysts say there could be more price increases that are likely to dampen demand further, given that the retailers are still selling the fuels below market rates and are losing a combined 5.5 billion rupees ($57 million) daily.
Also Read: India’s fuel exports plunge in May as domestic demand takes priority
Slowing growth in fuel sales for India, the world’s third-largest importer and consumer, is set to dampen the outlook for global demand now that transportation fuel consumption in China has peaked.
“We expect India’s gasoline demand growth to drop to around 3.5-3.7% in 2026 amid reduced discretionary driving,” said Dylan Sim, an analyst at FGE NexantECA.
That compares with an earlier estimate of 4% growth. The consultancy has also cut its forecast for growth in diesel demand to 2% from 2.5%.Moody’s Indian rating arm ICRA has revised down its forecast for gasoline demand growth for this financial year to 3% to 4%, compared with 5% to 6% before the war. For diesel, it expects demand to stay flat or shrink versus an earlier projection of 2% to 3% growth.
Prashant Vashisth, senior vice president at ICRA, said that the diesel and gasoline price hikes could exacerbate inflation which could hurt end-user demand.
Increases in logistics and shipping costs, also stemming from the Middle East conflict, could lead to “weak industry growth which would negatively impact diesel demand,” he added.
TRUCKERS AFFECTED BY LESS INDUSTRIAL ACTIVITY
Global oil prices have surged 40% to trade near $100 a barrel since the war restricted shipments through the Strait of Hormuz, which used to see a fifth of the world’s oil supplies pass through before the conflict.
Also Read: Higher petrol, diesel prices threaten to rekindle inflation pressures: Report
Signs of lower diesel demand due to slower industrial activity have emerged in the trucking sector.
Freight prices have fallen between 13% and 15% on three-quarters of key long-haul routes despite the increase in retail fuel prices, said SP Singh, senior fellow at the Indian Foundation of Transport Research and Training.
Singh noted that drivers are having to wait longer periods before making return trips.
“Truckers are not getting return tonnages. There is a delay of 3-5 days because manufacturing has slowed, that is hitting their revenue as their round trips per month have been reduced,” he said.
Preliminary data showed that Indian retailers’ gasoline sales in May rose 2.8% from a year earlier while gasoil sales edged up 0.9%. That compares with April figures of a 6.8% climb for gasoline and a 0.8% increase for gasoil.