Oil Crisis

In October 1973, Arab members of OPEC declared an oil embargo against nations that had supported Israel in the Yom Kippur War. The global oil price quadrupled within months. India, which imported nearly all of its petroleum, was hit hard and immediately.

Petrol prices in India jumped from ₹1.06 to ₹1.80 per litre in a single year — the largest single-year increase in Indian petrol history. Queues formed at fuel stations across the country. The government scrambled to negotiate alternative supply arrangements and accelerate domestic oil production. Inflation climbed sharply as transportation costs fed into every sector of the economy.

The crisis also exposed India's dangerous dependence on imported oil. It accelerated investment in the Bombay High offshore oil field, discovered in 1974, which eventually supplied about 25% of India's crude needs through the 1980s.

Gold, seen as a hedge against inflation, also rose sharply during this period, reinforcing the Indian tendency to hold physical gold as insurance against economic disruption. The 1973 oil shock is regarded as the single most important price event in the history of Indian petrol — the moment when fuel prices became a permanent fixture of public and political consciousness. No single event before or since has caused as steep a one-year rise in petrol prices.