When Will Fuel Prices in Nepal Return to Pre-War Levels Amid Iran Conflict?

The benchmark crude oil price, known as ‘Brent Crude,’ has returned to pre-war levels since Monday, similar to the period before the Iran conflict erupted. According to a spokesperson from Nepal Oil Corporation, the impact of this price change will only be seen in Nepal after about a week. Before the U.S. and Israel launched their attack on Iran on February 28, crude oil was priced at $76 per barrel. However, this week the market has seen prices drop even further. Spokesperson Manoj Kumar Thakur indicated that oil prices in Nepal will depend more on the cost of refined products rather than crude oil prices. He stated, “The corporation’s board will set a new price list effective from July 1.”

Thakur explained, “We implement new prices based on the rates we receive from IOC.” He added, “Previously, even when the diesel price rose to 90 rupees per liter, we did not increase it. But now, when prices fall, Nepali consumers will benefit directly.” Since the Iran conflict started, the global oil market was affected, leading to three price hikes in Nepal within 15 days over recent months.

Following the outbreak of war on February 28, the Nepal Oil Corporation issued a new price list on March 1, setting petrol at NPR 157 per liter and diesel and kerosene at NPR 142 per liter. Currently, petrol prices have risen to NPR 214.5 per liter, and diesel and kerosene to NPR 225 per liter. Additionally, cooking gas cylinders increased from NPR 1,900 to NPR 2,160 after the conflict began. Last week, with the signing of a memorandum of understanding between the U.S. and Iran, hostilities in the Middle East have been paused.

Thakur noted, “Before the war, the price difference between crude and refined oil was about $10 to $15 per liter for petrol and $15 to $25 for diesel.” Currently, prices for both crude and refined oil are dropping on the global market. However, refined product supplies remain limited and are not as readily available as crude oil, a situation that is expected to continue for some time.

He further explained, “Some refineries in the Middle East were affected by attacks, which has prevented refined oil from falling in price on international markets as sharply as crude oil.” He added, “The board will decide the new prices based on the rates received at the end of the month.”

Nepal receives petrol and diesel prices from IOC every 15 days, while prices for aviation fuel, LPG, and kerosene are updated monthly. Three years ago, Nepal Oil Corporation reinstated the “automatic pricing system” for petroleum products.

According to a Reuters article published earlier this week, despite abundant crude oil available in Asia, refined fuel remains scarce. The article mentioned that only after the reopening of the narrow Strait of Hormuz will additional refined fuel supply likely reach Asia by July.

Thakur stated, “However, we have taken care to avoid a fuel crisis. We have not increased import rates from India nor raised prices unnecessarily.” The corporation has spent approximately NPR 36 billion over the past two and a half months from these two sources. Thakur added, “Currently, the corporation faces a loss of NPR 1,174 per cooking gas cylinder.”