Nepal becomes South Asia's priciest place to fill a tank as US war on Iran rattles the pump

May 5, 2026

Nepal experienced four fuel price increases in a single month during April 2026, driven by disruptions in global oil markets caused by conflict in West Asia involving the United States, Israel, and Iran. Petrol prices surged 60 percent in under three weeks, reaching the highest levels among regional neighbors, which triggered widespread inflationary pressures across food, transport, and essential goods. The newly elected Rastriya Swatantra Party government led by Prime Minister Balendra Shah has implemented emergency measures including tax reductions, fuel quotas, and weekend closures to manage consumption, but these have proven insufficient to reverse the crisis.

Who is affected

Sumitra Khatiwada and other Kathmandu residents on fixed monthly incomes
Workers and consumers across Nepal
Nepal Oil Corporation (NOC)
Transportation sector (over 60% of petroleum consumption)
Freight forwarders and trucking companies
Students and Joint Student Unions
Government officials facing fuel quota reductions
Households experiencing cooking gas (LPG) shortages
Nepali workers in Gulf countries (potentially at risk)
Indian Oil Corporation (owed NPR 16.37 billion)
The Rastriya Swatantra Party government led by Prime Minister Balendra Shah

What action is being taken

The Cabinet has reduced customs duty and infrastructure tax on fuel by 50 percent
The government has introduced a two-day weekend (Saturday and Sunday) for government offices and educational institutions to cut fuel consumption
Fuel quotas for high-ranking government officials are being reduced
Wholesale fuel distribution is being controlled
NOC is directing distributors to supply only half-filled cooking gas cylinders to households
The Department of Transport Management has approved fare increases (16.71% for passenger fares on inter-provincial routes, 21.68% for cargo on hill routes, 15.75% for cargo on Tarai routes)
Joint Student Unions are organizing protests demanding repeal of petroleum taxes
Consumer groups are publicly calling for government action on consumer grievances

Why it matters

This crisis represents a critical vulnerability for Nepal's economy and social stability. As a landlocked nation completely dependent on imported petroleum products with no domestic refining capacity and a single supplier pipeline, Nepal has virtually no policy buffer against international price shocks. The fuel price increases are cascading throughout the entire economy, driving up costs for food, transportation, and essential goods, which disproportionately impacts fixed-income households and threatens to deepen poverty. The World Bank has already projected Nepal's economic growth to slow dramatically from 4.6% to 2.3%, and the crisis threatens remittance flows from Gulf countries that constitute a critical portion of national income. Additionally, this represents a major political test for the new RSP government that came to power after protests over economic mismanagement, and failure to manage the crisis effectively could undermine public confidence and fuel social unrest in a country with high social media engagement and a history of protest movements.

What's next

NOC has warned that prices could rise by a further 20 to 30 percent
The next payment of NPR 16.37 billion to Indian Oil Corporation is due April 23
Student leaders have warned of further agitation if the government fails to act on their demands
The Federation of Truck Transport Entrepreneurs has reminded authorities of a prior agreement requiring automatic fare adjustments when fuel prices fluctuate by more than NPR 5 per litre
Analysts suggest the government needs to accelerate the green transition, particularly for long-haul public transport and freight vehicles that remain diesel-dependent

Read full article from source: Global Voices