Public sector oil marketing companies (OMCs) hiked petrol and diesel prices by Rs 3 per litre on Friday, the first price increase in over four years, as the companies grapple with severe financial strain due to the surge in international prices amid the West Asia crisis. With this price hike, petrol is now priced at Rs 97.77 per litre, and diesel at Rs 90.67 in Delhi. Fuel prices vary across the country due to different levels of levies imposed by states.Global crude oil and fuel prices have surged due to the West Asia war and the consequent closure of the Strait of Hormuz, but in a bid to insulate domestic consumers from high prices, the government and the OMCs had so far not hiked regular petrol and diesel prices. In fact, prices of the two automobile fuels had not been hiked for over four years — since April 2022. They were reduced once in the past four years — ahead of the Lok Sabha election in 2024.According to industry sources, the quantum of this price hike will only partially ease the pressure on the OMCs, as the gap between the retail price of the two fuels and the market price is much wider. More calibrated and staggered price hikes may be on the cards. As of early this week, the OMCs were losing Rs 14 per litre on sale of petrol and Rs 42 per litre on diesel, according to sources. The OMCs are also incurring losses on sale of cooking gas to households and jet fuel for domestic flights, where only a fraction of the price escalation has been passed on.Also read | Top 10 Indian states in petrol consumption: UP beats Maharashtra for top spot; check Delhi’s rankDiscussions on a potential hike in the price of petrol and diesel had gathered pace within the government, with a consensus building that a price increase was necessary. The key considerations before the government were the timing and the quantum of the price hike: whether to do it within a few days or hold prices for a bit longer, and whether to raise prices steeply in one go or do it in a staggered manner, according to a top government official.Staggered approachA staggered approach has evidently been chosen. A one-shot steep price hike would not have been politically palatable, and would have had a shock factor to it, industry sources said. Calibrated price hikes give the government the opportunity to pass on the higher prices to consumers gradually, while keeping a tab on the public reaction and the inflationary impact on an ongoing basis, instead of the inflationary shock and the public backlash that a single steep hike might lead to.The timing of the global surge in energy prices, which clashed with assembly elections in some states, made it politically fraught for fuel prices to be hiked. With the elections over, a hike in prices was in the offing, highly placed sources in the government had earlier said. Early May, a top government official had told The Indian Express that a hike in fuel prices was “inevitable” and “only a matter of time”.While the country has managed to secure adequate crude oil volumes from non-Gulf suppliers and has not faced a shortage of crude amid the effective closure of the Strait of Hormuz, Indian refiners have been paying for the oil through their nose, spending valuable foreign exchange. Given the severity of its impact and the uncertainty over how long the supply crisis could last, Prime Minister Narendra Modi recently appealed for conservation of petroleum fuels, among other measures, aimed at moderating imports and foreign exchange outgo.Story continues below this adAlso read | PM Modi calls on Indians to use petrol, diesel with ‘great restraint’ amid West Asia crisisThe crisis has put the OMCs — Indian Oil, Bharat Petroleum, and Hindustan Petroleum — under severe financial stress. Petroleum Minister Hardeep Singh Puri said Tuesday that combined losses of the three refiners-cum-fuel retailers are projected at Rs 1 lakh crore in the April-June quarter at the current price levels, enough to wipe out their collective profits for the entire 2025-26 (FY26). The OMCs are losing Rs 1,000 crore-1,200 crore on a daily basis by selling major fuels like petrol, diesel, and LPG way below the market rates.“How long will the oil companies be able to take it? Frankly, that’s something that worries me. There have been times when the oil companies have done exceptionally well, (like) till recently. But the rate at which we are going, this one quarter of losses may wipe out the entire profit after tax of last year…how long can this happen? At some stage, the government will have to take a view on that,” Puri had said at the CII Annual Business Summit 2026 on Tuesday.Government revenuesOn its part, government had slashed excise duty by Rs 10 per litre on petrol and diesel late March to blunt the impact of high international prices on the OMCs, the retailers continue to bleed heavily on fuel sales. The excise duty cut has resulted in the government foregoing revenue of about Rs 14,000 crore a month, or close to Rs 1.7 lakh crore on an annualised basis.While the retail prices of petrol and diesel are deregulated, in practice, the government-owned OMCs — with 90% market share in fuel retail — kept prices stable in consultation with the government. They incurred losses when international oil prices surged, and earned hefty profits when the prices slumped. But the West Asia war and the resultant closure of the Strait of Hormuz goes much beyond the regular volatility in the global oil market.Story continues below this adNewsletterFollow our daily newsletter so you never miss anything important. On Wednesday, we answer readers' questions.SubscribeWith the effective halt in vessel movements through the Strait of Hormuz — from where one-fifth of global oil and natural gas flows usually transited — global energy supplies have been hit and prices have skyrocketed. India depends heavily on oil and gas imports to meet its energy needs, and fuel prices in the country are linked to global oil and fuel price benchmarks.Oil prices have been extremely volatile since the West Asia war began. The Indian crude oil basket, which averaged $70 per barrel last year, averaged over $114 in April. Furthermore, Indian refiners are incurring high additional costs due to emergency crude sourcing from the spot market and a surge in shipping and insurance rates, among others.The West Asia crisis has led to retail fuel price surges in a number of countries, with some even forced to ration fuel supplies. In addition to there being no increase in petrol and diesel prices in India, there has been no rationing of the two fuels as well. Some rationing was done for commercial and industrial LPG in order to prioritise cooking gas supplies to households.