Oil marketing companies to wait more before reverting to routine fuel price revisions

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Last Updated21/09/2024

India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 percent of its requirement

Despite the recent decline in international crude oil prices, public sector Oil Marketing Companies (OMCs) in India are expected to wait before passing the benefits to consumers.
The volatility in global oil markets remains a key concern, prompting OMCs to delay returning to the daily price revision system for petrol and diesel.

The OMCs—Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL)—suspended daily price revisions over two years ago amid extreme price fluctuations driven by multiple global factors, such as the Russia-Ukraine war.
Since then, fuel prices in India have seen only occasional adjustments, mainly due to excise duty cuts or specific political events, such as elections. Currently, in Delhi, petrol is priced at Rs 94.72 per litre, and diesel at Rs 87.62 per litre.

While international oil prices have softened in recent weeks, the market remains highly volatile due to several factors, including:
- Geopolitical instability.
- Global decisions like the US Federal Reserve's rate cuts.
- Economic data from major consumers like China, including its PMI (Purchasing Managers' Index) and crude oil storage trends.
These variables continue to influence crude prices. For instance, Brent crude slipped below $70 per barrel in early September 2024 but rose to over $74 per barrel within nine days, making it difficult for OMCs to take long-term pricing decisions.

As the world's third-largest consumer of crude oil, India imports over 85% of its oil needs. This dependency makes domestic fuel prices extremely sensitive to global market fluctuations.
Any adjustments in global crude prices directly impact pump prices in India, with a lag effect due to various pricing and economic factors.

Before making any decisions on revising retail fuel prices, OMCs are carefully assessing multiple factors, including:
- International oil prices: The current trend and potential future fluctuations.
- Fuel margins: Spreads between crude oil prices and the cost of refined products.
- Dollar-rupee exchange rate: Affecting import costs.
- Market volatility assessments: Forecasts on how stable prices might be.

Industry insiders indicate that OMCs may return to daily price revisions once international crude oil prices stabilize below $80 per barrel. At this price level, the OMCs would likely avoid incurring losses (under-recoveries) on petrol and diesel sales.
However, given ongoing geopolitical uncertainties and production regulations by major oil producers, this stabilization is uncertain.