How Much Does a 10% Rise in Oil Prices Add to your Monthly Budget?
- Remin Francis I R
- Aug 4
- 2 min read
We all feel the pinch at the petrol pump. But have you ever wondered "how much that pinch costs you when global events shake up oil markets?" A new report from the Reserve Bank of India (RBI) has delivered one of the clearest answers to date: for every 10% rise in global crude oil prices, India’s inflation could rise by 0.2%.
Let’s break that down. Suppose international oil prices jump from $80 to $88 a barrel; that 10% rise could nudge India's inflation from 5% to 5.2%. It sounds small, but in a country of 1.4 billion people, that 0.2% shift affects everything from your grocery bills to bus fares.
But here’s the good news. India doesn’t just sit back and take the full blow of these oil shocks. Behind the scenes, the government plays a surprisingly active role as a “shock absorber.” When global prices plummeted during the pandemic in 2020, the government increased excise duties to raise funds for pandemic-related expenses. But when prices surged in 2021 and again in 2022 during the Russia-Ukraine conflict, the government slashed these taxes to shield consumers from skyrocketing fuel costs. This balancing act has helped prevent massive spikes in what you and I pay at the pump.
This might come as a surprise: although petrol and diesel prices were technically deregulated over a decade ago, petrol in 2010 and diesel in 2014, the government’s hand still strongly guides what we ultimately pay. The idea that deregulation led to a “free market” is more myth than reality. The RBI report clearly shows that tax policy and government decisions still shape fuel prices in India in a big way.
But while we’ve been able to absorb these shocks so far, a warning bell is ringing. India’s dependency on imported crude oil has crept up from 77.6% in 2013-14 to a projected 88.2% in 2024-25. That’s a significant jump. Think of it like this: we’re plugging more and more of our national energy socket into global supply, and that plug is vulnerable to geopolitical earthquakes. The more we rely on imports, the harder it gets for the government to continue cutting taxes whenever prices spike.
What does this mean for your everyday expenses? It's not just about your petrol bill. Rising oil prices indirectly increase the cost of transporting goods, operating factories, and providing services. This leads to what economists call “core inflation”, the kind that affects almost everything you buy, from vegetables to electronics.
In short, oil prices don’t just move your fuel gauge; they move your whole budget.
So, what’s the takeaway? While India has done a commendable job in buffering citizens from global oil price volatility, this protection isn’t infinite. As our oil import dependency grows, we need long-term solutions, including investing in renewable energy, improving public transportation, and exploring favourable international oil trade agreements.
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