NEW DELHI: Oil marketing companies (OMCs) are not likely to reduce the transport fuel prices in the domestic market even as crude prices fell below $85 a barrel in the international market, lowest since January 14, 2022. An official from one of the OMCs, on condition of anonymity, said oil companies have suffered a major loss in the past few quarters, thus there is no scope to cut the fuel price.
“It is not only one company but all companies have suffered losses when crude price was high in the international market. Therefore, I don’t think there is any reason to cut down the price right now,” said the official. According to the oil marketing companies, Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) collectively lost Rs 18,480 crore on holding petrol and diesel prices.
These companies said the losses were due to erosion in the marketing margin on petrol, diesel and domestic LPG. In the April to June quarter 2022, BPCL posted a loss of Rs 6,291 crore, IOCL reported a net loss of Rs 1,995 crore and HPCL’s loss was at Rs 10,197 crore.
“Oil industry is volatile; I won’t be able to comment when the oil marketing companies make up their losses. In another word, the prices are not going to change in the next few months, “said the official. A Fitch report on BPCL credit outlook says: “We believe near-term prices will remain a function of the government’s efforts to balance OMCs’ financial health with inflationary and fiscal pressures. However, the marketing segment should turn profitable from FY24, as crude oil prices fall to Fitch’s assumption of $80 per barrel,” the report further says.
International crude oil prices have been under pressure due to fear of global recession and rising interest rates. Brent Crude Future, the benchmark for the crude price, on Monday, (6.52 pm IST) was trading at $85.65 a barrel, down from the peak of $125 in May.
However during the April to June quarter, oil companies did not revise petrol and diesel to tackle inflation in the country. Usually these companies revise oil prices on a daily basis, in line with international prices. India crude oil basket averaged $92 per barrel in September, down from $116 in June.
In a nutshell
Crude prices fell below $85 a barrel in global market, lowest since Jan 14, 2022
Oil companies collectively lost `18,480 crore on holding petrol and diesel prices
India crude oil basket averaged $92 per barrel in September, down from $116 in June