According to ICICI Securities, oil marketing companies (OMCs) have lost an estimated ₹10–12 on the sale of a litre of petrol and diesel in the current quarter, which can be only partly offset by increased refining margins, Economic Times reported.
"Despite the strength seen in refining, overall earnings for OMCs will continue to remain under pressure, given the steady expansion in marketing losses over the last three months," the brokerage said.
With international prices expanding sharply over the last 2-3 months and the continuing freeze on domestic retail prices, estimated losses on petrol and diesel have risen to Rs.10.5 and Rs.12.5 per litre respectively in the current quarter till the week of June 17, as per the brokerage. In the January-March period, the losses were Rs.1.5 and Rs.1.6 per litre for petrol and diesel, respectively.
ICICI Securities estimates that every $1 per barrel increase in gross refining margins can compensate for Rs.3-4 per litre of retail fuel loss for OMCs.
Crude oil prices have been on the rise since the beginning of the Russian-Ukraine war on February 24. Refined fuel prices have risen even faster than crude oil in the international market. Benchmark Asian refining margins have risen to $24 per barrel, compared to the past decade's average of $5.7 per barrel. The margins on diesel have risen to $60 per barrel and on petrol to $40.
In May '22, the government cut the excise duty on petrol and diesel by Rs. 8/lt (from Rs. 27.9/lt to Rs. 19.9/lt) and Rs. 6/lt (from Rs. 21.8/lt to Rs. 15.8/lt), respectively. The price cut is expected to give relief to consumers battered by high fuel prices that have also pushed inflation to a multi-year high.
Usually, the cut in excise duty will allow OMCs some leeway to hike retail fuel prices, but the same has yet to happen. While Brent crude remains above $110 per barrel, retail fuel prices have not been raised since April 6.
Petrol and diesel prices rose by Rs.10 per litre between March 22 and April 6—the highest-ever increase during a 16-day period since fuel prices were deregulated two decades back.
Earlier, pump prices were frozen for a record 137 days from early November 2021 to March 21, 2022, despite soaring crude prices.