Tension has flared up again between Iran and the US, raising fears of rising inflation. The troubled situation around the Strait of Hormuz indicates that petrol and diesel prices may rise again. Although the government has not yet given any official statement on this, it is important to look at the options available to the government in times of such a crisis.
**Rise in crude oil prices**
Crude oil prices rose during March and April, forcing the government to increase petrol and diesel prices in May – a move that caused considerable inconvenience to the common man. Now the same situation is happening again; Crude oil prices have risen again due to the new conflict between Iran and America. As of today (Tuesday), the price of Brent crude oil has reached almost $86 per barrel.
**Government has two options**
In the current situation, the government has two options: either put the entire burden on the public by increasing the prices of petrol and diesel, or bear the cost itself by reducing taxes. The government has not announced any such measures yet, but the continuous rise in crude oil prices is a matter of concern for the public.
**Pressure on oil companies**
Oil companies are under even more pressure than the public, because they are most affected by the rising cost of oil. Government companies like Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum (HPCL) are often not able to increase prices immediately due to political and social reasons. This creates financial pressure, causing companies to incur losses. According to government data, the total ‘under-recovery’ (loss of revenue due to selling below cost) of these companies by June 2026 had reached ₹2.19 lakh crore. This shows that companies were selling fuel below its cost for a long time. If a similar situation arises again, the pressure on these oil companies will increase further.
Prices increased in May
Although tensions between Iran and the US had been ongoing since February, the government kept taxes low until April, saving the public from rising costs. However, as pressure increased on the government and oil companies, it was decided to increase the prices of petrol and diesel. Petrol and diesel prices were increased four times in the month of May. If crude oil prices again go above $100 per barrel, the government and oil companies will once again be under immense pressure. In such a situation, the government will be left with only two options. It remains to be seen whether the government will immediately pass this burden on to the public or will handle the situation for some time.