India Hikes Fuel Prices by 3% as Iran Crisis Impacts Economy

AI Summary

India has raised fuel prices by 3% due to the ongoing Iran crisis and the closure of the Strait of Hormuz, which has impacted the country's economy. The price hike is aimed at offsetting losses triggered by the shortage of supply.

The Lead

India has raised fuel prices by about 3 percent as the energy crisis driven by the Iran war and closure of the Strait of Hormuz starts to bite on the economy.

Fuel Price Hike

The government in New Delhi announced the 3 rupees ($0.03) per litre price hike on Friday, as it moved to offset losses triggered by the shortage of supply. Gasoline prices rose to 97.77 rupees ($1.02) a litre, while diesel climbed to 90.67 rupees ($0.94).

Economic Impact

India is the world’s third-largest oil importer, with 90 percent of the oil it consumes coming from overseas, and about half of its usual crude supplies transiting the Strait of Hormuz. This has seen the country heavily impacted by rising energy prices and supply disruptions from the US-Israel war on Iran.

Government Measures

Prime Minister Narendra Modi urged Indians to adopt voluntary austerity measures, calling on them to work from home whenever possible, limit travelling abroad, and reduce purchases of gold. Modi described saving fuel as an act of “patriotism” and encouraged greater use of public transport, carpooling, and lower fertiliser consumption.

Future Outlook

India has also accelerated blending ethanol into gasoline as part of its push to cut crude oil imports. The country has signed pacts with the United Arab Emirates (UAE) on oil and gas, as well as strategic defence ‌cooperation, to strengthen its energy security.