India may be seeing an improvement in crude oil supplies from West Asia, but that recovery has not yet translated into cheaper oil reaching its refineries. The reason is a less visible part of the energy bill: crude oil shipping costs have risen from about $3 per barrel a year ago to more than $20, putting pressure on refinery economics, oil marketing margins and the possibility of relief for fuel consumers.
The development shows why the price India pays for imported crude cannot be understood by looking only at the headline international oil price. The cost of getting a barrel to an Indian refinery includes the price of the crude, freight, insurance and other delivery-related expenses. When freight rises sharply, an improvement in supply at the production end can be absorbed before it reaches the consumer.
According to investment bank Jefferies, the freight component of landed crude cost has increased almost eightfold from its level before the conflict-related disruption. It now accounts for more than 25% of the total cost of crude delivered to a refinery, compared with about 3% earlier. That shift changes the economics of importing oil even when crude availability itself begins to improve.
The distinction matters for India because the country meets a large share of its crude requirement through imports. Indian refineries therefore remain exposed not only to crude prices but also to the cost and reliability of maritime transport. A barrel that is cheaper at the point of purchase can still arrive at a substantially higher cost if tankers require longer routes, additional security measures or more expensive insurance.
The supply picture has improved, but the logistics system has not normalised at the same speed. West Asian crude supply has reportedly recovered to more than 90% of its level before the disruption. Jefferies also said that physical crude premiums, excluding Iran, fell 65% in one week to $9 per barrel as exports from the region improved. Yet the reduction in the crude premium is being partly offset by the cost of moving the cargo.
This is the central tension in the current energy market: supply is recovering while transport remains expensive. The two factors affect different parts of the value chain. Greater supply can reduce the premium paid to secure crude, but it does not automatically reduce the risk priced into shipping. Until both components ease, Indian refiners may not receive the full benefit of improved availability.
Goldman Sachs has identified five factors behind the rise in freight costs. These include the risk associated with the Strait of Hormuz, ship-to-ship transfers outside the Gulf, higher marine fuel prices, operational difficulties for tankers and the limited use of Iran’s fleet. Together, these pressures raise the cost of moving crude and make each voyage more complex.
The Strait of Hormuz is particularly important to the calculation because security concerns have led vessels to use alternative routes, according to the report. Longer journeys increase fuel consumption, vessel utilisation and operating costs. They can also reduce the effective availability of tankers, since a ship engaged on a longer voyage cannot be redeployed as quickly for another cargo.
Marine fuel has added another layer of pressure. The report says the price of marine fuel in Singapore rose from $428 per tonne to $919 per tonne. For shipping companies, that directly increases voyage expenses. For refiners and oil marketing companies, the increase eventually appears in the landed cost of crude unless it is absorbed elsewhere in the supply chain.
Ship-to-ship transfers also point to a more complicated transport network. Such transfers may be used to move cargoes outside the Gulf or to manage route and access constraints, but they add operational steps and costs. The report does not establish how much each factor contributes individually, but the combined effect has been a sharp increase in freight compared with the previous year.
The effect on Indian fuel prices is not automatic. Jefferies estimates that oil companies could face marketing losses of Rs 28 per litre on petrol and Rs 34 per litre on diesel if the higher costs are not reflected in retail prices. These are estimates of potential pressure on marketing margins, not announced retail price increases.
Whether consumers see higher petrol and diesel prices will depend on how the additional cost is distributed. Oil marketing companies may absorb some of it through lower margins, crude producers may offer discounts, or policy decisions may limit the extent to which higher costs are passed on to customers. The supplied report does not establish which option will prevail.
This is where the structure of India’s fuel market becomes important. Retail prices are not determined by crude availability alone. They reflect the combined impact of the crude purchase price, freight, insurance, refining economics, marketing margins and policy choices. A temporary rise in one component may not produce an immediate pump-price revision, but a prolonged increase can make it harder for companies to maintain existing prices without sacrificing profitability.
The pressure also extends beyond petrol and diesel. The report says spot liquefied natural gas prices rose 12% in one week to $29 per million British thermal units. Supply-chain normalisation and winter demand could keep gas prices elevated, according to the Jefferies assessment. For India, higher gas costs can affect industries and power users that depend on imported LNG, although the supplied material does not quantify the impact on specific sectors.
The urban consequences of these energy costs are indirect but broad. Fuel is an input into road freight, public and private transport, construction activity, manufacturing and the movement of food and other goods. If transport costs remain elevated, businesses may face higher operating expenses. Those costs can then influence prices across urban supply chains, even when the initial disruption occurs far from Indian cities.
The impact will not be uniform. Companies with stronger pricing power may pass on costs more quickly, while firms operating on thin margins may absorb them or reduce activity. Households that depend heavily on private vehicles are exposed through fuel purchases, while other households may experience the effect through higher delivery, food or service costs. The report does not provide a sector-wise estimate, but it establishes the transmission route from maritime freight to domestic costs.
For oil companies, the immediate issue is margin protection. If landed crude costs rise while retail prices remain unchanged, marketing margins come under pressure. If retail prices rise, consumers and businesses face higher fuel costs. This creates a policy and market trade-off rather than a simple question of whether crude supply is improving.
The distinction between temporary and sustained freight pressure will therefore matter more than a single week’s movement. A short-lived increase may be absorbed through inventory, discounts or margins. If shipping costs remain above normal for an extended period, however, the financial pressure on importers and fuel retailers becomes harder to contain. The source report links India’s future position to how quickly West Asian maritime routes return to normal and how rapidly freight rates decline.
The evidence confirms that supply recovery alone is insufficient to restore energy-cost relief. Physical crude premiums have fallen, but freight, marine fuel and security-related expenses remain elevated. The scale of the effect on petrol and diesel prices is still uncertain because it depends on company margins, producer discounts and government policy. The indicators to monitor are crude freight rates, marine fuel prices, the security situation around key shipping routes, LNG prices and the retail pricing decisions of Indian oil marketing companies.
