- Sunday, 29 March 2026
Kathmandu, Mar. 29: Supply-side constraints on petroleum products caused by ongoing geopolitical tension involving Iran, Israel and the United States have created an energy crisis and pushed up prices, with their consequences being felt across global markets.
Most countries are now facing high inflation rates triggered by the escalating prices of petroleum products. Nepal is not insulated from these effects.
The livelihoods of ordinary people have started being hit hard due to the rising prices of petroleum products and other goods and services. The prices of petrol and diesel have surged significantly within a short period, with adjustments made twice in a span of two weeks.
Within the last 10 days, the state-owned Nepal Oil Corporation (NOC) has increased the price of petrol by Rs. 30 per litre and diesel by Rs. 25 per litre. With the latest adjustment, petrol now costs Rs. 187 per litre, while diesel is priced at Rs. 167 per litre.
However, the NOC claims that it has not adjusted fuel prices fully in line with the international market, despite facing huge losses on these products, considering the concerns of the public. It has not increased the prices of cooking gas and aviation fuel.
Meanwhile, consumers are facing hardship in obtaining cooking gas. Due to supply issues in the market, the NOC has already started supplying half-filled gas cylinders.
Life getting harder gradually
Economists have warned that inflation in Nepal is likely to rise further due to both internal and external factors, creating negative ripple effects on the country’s import-based economy.
With rising petroleum prices, all sectors of the economy—and daily life—are being affected, said economist Dr. Gunakar Bhatta.
He explained that the prolonged energy crisis and ongoing uncertainty are increasing supply-side pressures, which in turn raise the cost of both imported and domestically produced goods.
“When the prices of food and non-food items increase, people are forced to spend more to sustain their livelihoods,” he said.
Economist Dr. Chandra Mani Adhikari added that inflation will hit low-income groups the hardest, worsening poverty and income inequality.
Since incomes remain unchanged while prices rise, it becomes increasingly difficult for people to maintain their standard of living. Prices of essentials such as edible oil, sugar, and other commodities have already surged in recent months.
“The biggest impact will be on daily wage earners and those with fixed incomes,” Dr. Adhikari said.
Madhav Timalsina, president of the Consumer Rights Investigation Forum, said supply-side constraints—especially rising petroleum costs—have placed a heavy burden on the public.
Frequent price hikes by the NOC have increased the cost of production and transportation, affecting nearly all goods, he said.
He also criticised weak market monitoring, claiming it has allowed traders to raise prices unfairly, even for locally produced goods, by citing international factors.
According to him, some traders are inflating prices of previously imported goods like edible oil without justification.
Timalsina said transport operators are now pressuring the government to increase fares.
Instead of raising prices, he suggested reducing petroleum consumption through measures like an odd-even vehicle system and cutting taxes on fuel to stabilise prices.
Dr. Adhikari emphasised that rising fuel prices impact both daily life and the broader economy, reducing savings and increasing uncertainty in investment.
He stressed the need to explore alternatives rather than relying on frequent price hikes.
Sumitra Khatiwada of Kathmandu said that rising prices of daily necessities have made it difficult to manage household expenses on a fixed income.
She noted that costs have increased across the board—from essential goods to luxury items—since the onset of global conflicts.
“If prices continue to rise, life will become even more difficult for workers,” she said, urging the government to strengthen market monitoring and prevent artificial price hikes.
Even advanced economies under strain
Following the shortage of petroleum products, long queues of consumers have been seen in many countries in Asia as people attempt to obtain fuel. In response, several countries have adopted alternative measures to reduce the consumption of petroleum products.
The price of a barrel of Brent crude, the international benchmark, has hovered around $115, up nearly 50 per cent since the war began.
An acute shortage of petroleum products has also been observed in the Philippines, Bangladesh and Pakistan, among others.
According to international news agencies, even China—which is believed to have reserves equivalent to three months of imports—is making adjustments, limiting fuel price hikes as citizens face a 20 per cent increase in prices.
However, the government of Nepal has not taken any concrete decision in this regard so far.
The NOC claims that petroleum products are being supplied to the market as usual, as the Indian Oil Corporation (IOC)—Nepal’s sole supplier—has been providing fuel regularly according to demand.
“The IOC has been delivering petroleum products as per our demand so far. However, due to rising prices, NOC will face a financial burden in making payments to IOC for fuel imports in the coming days, as it has been selling petroleum products at a loss despite adjusting prices twice in the last 10 days,” said Managing Director of NOC, Dr. Chandika Prasad Bhatta.
According to him, the continuous increase in international petroleum prices has made it difficult to adjust domestic fuel prices in line with the automatic pricing system based on rates received from IOC.
This mismatch between rising international costs and limited domestic price adjustments has significantly widened the corporation’s losses, raising concerns about its ability to make timely payments to IOC, he added.
He, however, said that NOC will make its efforts to ensure a smooth supply of petroleum products in the coming days.
NOC has maintained stock of petroleum products according to its capacity as the present stock of petroleum products will meet demand for 10-12 days.
Meanwhile, NOC has been distributing imported gas to bottling plants on a daily basis in line with imports.
Amid this challenging situation, the corporation has urged consumers and stakeholders to use petroleum products economically.
He said that the NOC is discussing alternative measures to improve consumption efficiency and will implement them as soon as the supply situation in Nepal is affected.
Growth, inflation, revenue affected
Dr. Bhatta, former Executive Director of Nepal Rastra Bank, said that the conflict in the Gulf region could have multifaceted impacts on Nepal’s economy, ranging from fuel supply disruptions and labour issues to rising inflation and a slowdown in economic activity.
“As tensions rise in the region, the first thing affected is the supply of petroleum products and liquefied petroleum gas in the international market,” he said. “Its direct impact is on countries dependent on energy imports, and Nepal is not immune to it.”
He stated that rising fuel prices in the international market will be reflected in the prices of petroleum products, transportation costs, and daily consumer goods in Nepal.
“When oil and gas prices rise, transportation costs increase, which then affects the prices of everything from food to construction materials,” he said. “This risks increasing the overall inflation rate and may also cause a contraction in economic activity.”
Citing an International Monetary Fund (IMF) study, he said, “A 10 per cent increase in the price of crude oil per barrel raises inflation by 0.4 percentage points and reduces economic growth by 0.15 percentage points.”
The Ministry of Finance has revised its estimate, stating that the economic growth rate for the current fiscal year will be limited to 3.5 per cent. Achieving this growth projection in the upcoming fiscal year will be difficult if inflation continues to rise, he said.
He added that the construction sector will also be affected, which could slow down economic activities and hinder overall growth.
According to him, the negative impact of the conflict will also be felt in the wholesale and retail trade, tourism, and import-export sectors, which contribute significantly to the country’s economy.
While likely to reduce economic growth, it directly hits revenue collection of the government.
Similarly, Dr. Adhikari said that the war has reduced the supply and sale of natural gas and the production of chemical fertilisers, leading to price increases. “This will ultimately affect the production of agricultural commodities,” he said.
He also noted that tourists have started canceling bookings in Nepal. Such cancellations during the peak tourist season could significantly affect the tourism sector.
On the other hand, Dr. Bhatta said that the conflict could also affect foreign employment and remittances.
“Millions of Nepalis are working in the Gulf region,” he said. “If the conflict continues for a long time, both employment and remittance inflows may be affected.” Nepal receives around 41 per cent of total remittance from the Gulf region.
“Rising prices of petroleum products could increase the import bill, thereby directly reducing foreign exchange reserves, he said.
Remittances are also a key contributor to deposits in banks and financial institutions. A decline in remittances would reduce deposits and may force banks and financial institutions to increase interest rates.
Effect on medicine sector as well
President of the Nepal Chemists and Druggists Association, Prakash Kumar Khandelwal, acknowledged that the medicine sector in Nepal has also been affected by the Iran–Israel war.
“It is natural for the medicine sector in Nepal to be affected by global developments. Supply-side problems in petroleum products will directly and indirectly impact production and costs. The production cost of medicines in Nepal has already increased,” he said.
He stated that around 40–45 per cent of finished medicines are imported into Nepal. In addition, it is necessary to import at least 80 per cent of raw materials required to produce medicines domestically.
He added that the prices of plastic and other packaging materials have already increased, which will further push up the cost of medicines in Nepal.
However, he said that there is no problem in the supply of medicines so far. He warned that if the war continued for a long time, it could eventually affect the supply of both medicines and raw materials.
Way forward
Experts have suggested that the incumbent government should strengthen economic diplomacy to ensure the smooth supply of essential goods in the days to come.
Economist Dr. Bhatta said that the government should focus on reducing the consumption of imported fuel, making its distribution more systematic, and promoting the use of electricity for cooking.
“As many countries are facing an energy crisis and adopting alternative measures, the NOC should focus on maintaining sufficient stock of petroleum products within its capacity and also adopt measures to reduce consumption,” he said.
In this situation, the operation of mass transportation systems is a necessary alternative to reduce fuel consumption. The government can also implement an odd-even vehicle number plate system to limit fuel use.
He further suggested that government offices should use buses instead of personal vehicles, which would help reduce fuel consumption.
Schools and colleges should make virtual classes mandatory whenever possible, he said.
He emphasised that the new government must increase investment in the hydropower sector to make Nepal energy self-reliant and be better prepared for similar global crises in the future.
The NRB has already made provisions for banks and financial institutions (BFIs) to prioritise investment in the hydropower sector.
Economist Dr. Adhikari also noted that this is an opportunity for the government to encourage people to use electric stoves instead of cooking gas even in rural areas.
He said that the government should act wisely to prevent negative impacts on the economy and people’s daily lives caused by the global energy crisis and its chain reaction.
“The presence of the state must be strong to provide relief to the general public and minimise economic losses caused by global supply chain constraints. The government should focus on reducing overhead costs in oil distribution and encourage people to reduce the consumption of petroleum products,” he said.
