Kathmandu: The ongoing conflict involving the United States, Israel, and Iran has begun to impact Nepal directly, as attacks on refinery hubs in Gulf countries—responsible for around 32 percent of global fuel supply—disrupt production and supply chains.
As a result, Nepal Oil Corporation has been forced to import petroleum products at significantly higher prices, resulting in deep financial losses. At the same time, consumers are bearing the burden, paying more for fuel in the domestic market.
The corporation’s losses have mounted because domestic prices have not been adjusted in line with rising international rates. Based on the latest price list received on Tuesday from Indian Oil Corporation, the corporation has incurred losses of Rs 13.21 billion in just 15 days alone, as prices of petrol, diesel, and LPG remain unchanged, except for aviation fuel.
According to spokesperson Manoj Thakur, cumulative losses have reached Rs 18.81 billion. This includes Rs 100 million from February 15 prices, Rs 500 million from March 1, Rs 5 billion from March 16, and the latest Rs 13.21 billion from current pricing gaps. At present, the corporation is losing around Rs 627 million every day.
Despite receiving updated price lists under the automatic pricing system, Nepal has not revised retail prices for petrol, diesel, and LPG. Fuel is still being sold at rates fixed on March 25, with petrol priced between Rs 184 and 187 per litre and diesel between Rs 164 and 167.
This mismatch has forced the corporation to sell at a loss of Rs 47.12 per litre on petrol, Rs 133.45 on diesel, and Rs 416.37 per LPG cylinder. Officials say that even small gaps in price adjustments earlier snowballed into the current crisis.
Since early February, Indian Oil Corporation has revised prices five times. While international prices steadily increased, domestic adjustments remained limited, widening the loss gap. At one point, based on global rates, petrol should have reached Rs 188 per litre and diesel Rs 196, with LPG exceeding Rs 2,100 per cylinder—but the government opted for smaller increases to shield consumers.
Further price hikes from India, such as Rs 41.60 per litre for petrol and Rs 94.93 for diesel in the latest revision, have worsened the situation. Nepal adjusted only aviation fuel prices, leaving other fuels unchanged, which significantly expanded losses.
The corporation has already faced similar pressure during the Russia–Ukraine war in 2022, when it struggled to pay Indian Oil Corporation dues of Rs 24 billion. At the time, it relied on government loans, bank borrowing, and price stabilization funds to manage payments.
Managing Director Dr Chandika Bhatta has urged consumers to conserve fuel, noting that if each motorbike user saved just one litre of petrol daily, the country could save around Rs 220 million per day. Similarly, if each car saved one litre, an additional Rs 40 million could be conserved daily. Over 15 days, total savings could reach nearly Rs 3.9 billion.
While countries like Pakistan, Bangladesh, Sri Lanka, and India have adopted measures such as remote work policies, school closures, and subsidies for electric cooking to reduce fuel consumption, Nepal has yet to implement any such policies, raising concerns about future shortages and economic strain.
Meanwhile, Nepal Oil Corporation continues to make payments to Indian Oil Corporation every 15 days, with monthly payments reaching up to Rs 24 billion. However, with reserve funds nearly exhausted, officials warn that meeting upcoming payments—especially the one due on April 8—will be difficult.
The corporation is now seeking to tap into the government’s price stabilization fund, which holds around Rs 19 billion. Discussions are also underway about taking bank loans or requesting deferred payments from the Indian Oil Corporation if losses continue to rise.
The root cause of the price surge lies in escalating geopolitical tensions. Attacks on major refineries in Saudi Arabia, Kuwait, and Qatar have disrupted production. For instance, Saudi Arabia’s Ras Tanura refinery—one of the world’s largest—has partially shut down after sustaining damage. Other facilities, including Yanbu and Kuwait’s Mina Al Ahmadi refinery, have also halted production.
Additionally, Qatar’s Ras Laffan industrial hub—one of the largest LNG centres globally—has been affected, further tightening energy supplies.
These disruptions have reduced the output of petrol, diesel, LPG, and jet fuel, driving global prices upward. Compounding the issue are rising maritime insurance costs, higher transportation expenses, and tensions around the Strait of Hormuz, all of which have pushed fuel prices even higher.
Refining costs also add to the burden. Processing one barrel of crude oil yields roughly 45 percent petrol, 30 percent diesel, and the rest in aviation fuel and LPG. Additional refining costs per litre range from US$ 0.15 to US$ 0.25, depending on the product.
Nepal imports only finished petroleum products through the Indian Oil Corporation, rather than crude oil, making it more vulnerable to global price fluctuations. India itself imports about 85 percent of its crude oil needs, meaning any disruption in its supply chain directly impacts Nepal.
Globally, around 102 million barrels of crude oil are produced daily, with Gulf countries contributing about 32 million barrels. Saudi Arabia alone produces around 10 million barrels per day, followed by Iraq, the UAE, Kuwait, and Iran.
Outside the Gulf, major producers include Russia, Canada, China, and Brazil. India sources about 35 percent of its oil from Russia, along with imports from Iraq, Saudi Arabia, the UAE, and others.
However, with supply disruptions in the Gulf, India is facing difficulties securing sufficient imports, forcing it, and consequently Nepal, to pay significantly higher fuel prices.
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