Oil In The 'Red Zone': Will You Have To Pay More For Petrol And Flights This Holiday Season?

Last Updated:May 22, 2026, 10:07 IST

India is one of the world’s most oil-dependent major economies, importing nearly 85 per cent of its crude oil requirements

As tensions in West Asia push global oil markets towards what the International Energy Agency (IEA) calls a possible “red zone", one question is beginning to worry consumers far from the conflict itself: will Indians soon pay more for petrol, diesel and flight tickets?

The concern is not hypothetical. India is one of the world’s most oil-dependent major economies, importing nearly 85 per cent of its crude oil requirements. That means any instability in the Gulf, especially around the Strait of Hormuz, one of the world’s most critical energy chokepoints, quickly reverberates through India’s economy.

And this time, the warning is coming just as global holiday travel demand peaks, putting additional pressure on aviation fuel and transport costs worldwide.

Why The Strait Of Hormuz Matters So Much To India

At the centre of global anxiety is the Strait of Hormuz, a narrow waterway between Iran and Oman through which nearly a fifth of the world’s oil supply passes every day.

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For India, this route is vital. Much of the crude imported from Iraq, Saudi Arabia, the UAE and Kuwait travels through Hormuz before reaching Indian refineries.

As conflict, military escalation or shipping disruptions slow movement through the strait, oil prices spike rapidly. Markets too react not just to actual shortages, but to fears of future supply disruptions. That is why even limited tensions in the Gulf often trigger immediate jumps in crude prices globally.

How Global Oil Prices Affect Indian Consumers

Many consumers assume petrol prices rise only when crude oil becomes extremely expensive. In reality, fuel prices in India are influenced by several factors such as global crude oil prices, the rupee-dollar exchange rate, refining and transportation costs, central excise duties, state-level VAT taxes, and margins of oil marketing companies.

So, even if crude prices rise moderately, a weakening rupee or tax pressures can amplify the impact domestically.

India’s oil companies such as Indian Oil, BPCL and HPCL sometimes absorb short-term shocks instead of immediately passing costs onto consumers. But that cushioning cannot continue indefinitely if global crude remains elevated for weeks or months.

Will Petrol And Diesel Prices Rise Immediately?

Not necessarily but sustained crude price increases usually become difficult to contain. On Monday last week, the government hiked the prices of petrol, diesel and CNG by Rs 3. The prices saw another rise on Tuesday this week.

If global oil prices remain high, petrol and diesel prices could rise further. State governments may face pressure to reduce VAT and the Centre could consider excise duty cuts. Also, inflation risks could increase across sectors

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Even small increases matter because fuel affects almost every layer of the economy , from transport and logistics to agriculture and manufacturing.

Why Flight Tickets Could Rise Faster Than Petrol Prices

Aviation is often one of the first sectors hit during oil shocks. That is because aviation turbine fuel (ATF) forms one of the biggest expenses for airlines, sometimes accounting for 35-45 per cent of operational costs.

Unlike petrol prices, which governments occasionally manage politically, airlines usually respond more quickly to fuel cost increases through higher ticket prices, fuel surcharges, reduced discounts, and dynamic fare spikes during peak travel periods.

This becomes especially important because the current crisis is unfolding during the global summer holiday season, when demand for air travel is already extremely high.

International routes are particularly vulnerable because airlines operating long-haul flights consume far more fuel and face global pricing pressures.

Budget carriers may also struggle because low-cost airline models depend heavily on keeping fuel costs manageable.

Beyond Petrol Pumps And Airports

Oil shocks do not remain confined to fuel stations. Higher crude prices eventually affect food delivery costs, cab and auto fares, bus transportation, logistics and trucking, vegetable and grocery prices, e-commerce deliveries, fertiliser production, and manufacturing costs.

That is because transportation is embedded into nearly every part of the supply chain.

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For instance, higher diesel prices increase trucking costs. Higher logistics costs push up retail prices, farmers face costlier fertilisers and transportation, and airlines and shipping companies pass costs to consumers. This is how oil-driven inflation spreads gradually through the economy.

Could India Avoid The Worst Of The Crisis?

India is not entirely without buffers. Over the past few years, New Delhi has diversified oil imports significantly, especially by purchasing discounted Russian crude after the Ukraine war.

India also maintains strategic petroleum reserves designed to provide temporary relief during major disruptions.

Additionally, slower global economic growth could reduce oil demand. OPEC producers may increase supply if prices spike excessively. Diplomatic pressure may prevent prolonged Gulf disruptions and the government could intervene through tax adjustments.

India’s refining sector is also relatively sophisticated compared to many developing economies, giving policymakers some flexibility. But none of these factors fully insulate India from a prolonged Gulf crisis.

Why This Oil Shock Feels Different

Analysts speaking to The Guardian say the current crisis comes after several years of repeated global disruptions such as Covid-era supply chain breakdowns, Russia-Ukraine war energy shocks, Red Sea shipping attacks, and inflation spikes across advanced economies.

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Global energy markets already remain fragile. That is why the IEA’s warning about markets entering a possible “red zone" has attracted attention. It reflects fears that the world may have less spare capacity and fewer buffers than during previous crises.

And for countries like India, which are heavily dependent on imported energy while managing inflation and consumer spending pressures, even temporary spikes can have outsized political and economic consequences.

So, Should Indians Expect Higher Costs Soon?

The short answer: not immediately, but the risks are rising.

If tensions ease quickly and shipping routes remain open, India may avoid major consumer-level shocks. But if crude prices remain elevated through the summer, petrol and diesel prices may gradually increase, flight tickets are likely to become more expensive sooner, and inflationary pressures could spread into food, transport and services.

In an interconnected global economy, a conflict thousands of kilometres away can still shape the cost of daily life in India, from commuting to booking a holiday flight.

News explainers Oil In The 'Red Zone': Will You Have To Pay More For Petrol And Flights This Holiday Season?

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