If crude prices stay below $80 a barrel during this time, state-run oil marketing companies (OMCs) are expected to reduce retail prices of gasoline and diesel to some degree, right before the general election that is slated for April, according to sources.
Given that the price of petroleum is currently below the $80/barrel barrier, the OMCs could have lowered prices at this time, except for the increased uncertainty brought on by geopolitical concerns. Even if oil prices spiked, OMCs would not have been able to hike prices until after the elections if there had been a retail price decrease now.
Analysts predict that the three OMCs—Indian Oil, BPCL, and HPCL—will continue to turn a profit as long as the price of oil stays below $85 per barrel. The conflict between Russia and Ukraine caused the Indian basket of crude prices to rise by an average of 18% in FY23 to $93.15/barrel from $79.18/barrel in FY22. As a reslt, OMCs suffered significant marketing losses because they were unable to pass on the price increases to customers. In May and June of 2023, the Indian basket averaged $74-55/barrel; in July, it was $80.37; and in September, it reached $93.54 on average. Then, in October 2024, it dropped to $90.08, in November to $83.46, and in January 2024 to 79.22.
Since May 2022, retail fuel prices in India have been fixed. But because of this price control, OMCs have been able to recover their FY23 losses in FY24, even in the face of increasing and dropping crude prices. OMCs are currently over recovering Rs. 6 for fuel and Rs. 11 for gasoline per litre. The government has decided to postpone its planned equity support for the OMCs to FY25 from FY24 and half it to Rs 15,000 crore due to the companies’ notable increase in profitability.
