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Why petrol prices have not fallen as much as global crude oil prices

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

Motorists are finally able to enjoy lower petrol prices at gas stations, thanks to easing global crude oil prices. But the quantum of fall in domestic fuel prices is no where close to the plunge we have seen in the international crude rates.

Motorists are finally able to enjoy lower petrol prices at gas stations, thanks to easing global crude oil prices. But the quantum of fall in domestic fuel prices is no where close to the plunge we have seen in the international crude rates.

Since October 18 till date, petrol and diesel prices have declined about 10 percent in Mumbai. Global crude oil prices, on the other hand, have lost nearly 30 percent from the peak of $86.70 a barrel hit on October 3.

Following two reasons could explain this disparity:

Gate Pricing

Indian oil marketing companies (OMCs) follow gate pricing,  the price at which products are transferred from refining to marketing. Gate pricing considers the international rates of fuel for two weeks, the exchange rate and freight, insurance, among other charges.

The price at which refiners sell fuel to retailers also include taxes, dealers’ commission.

The OMCs — Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) — control over 90 percent of the retail sales in fuel and are in charge of setting rates for the oil industry.

Pricing Mechanism

Another reason could be the pricing mechanism which is followed by these OMCs.

As per the country’s pricing mechanism, domestic fuel prices depend on international fuel prices on a 15-day average, besides the value of the rupee. Hence, the sharp decline of the international oil prices will fully reflect only after a fortnight.

 

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nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
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PESO increases pilot projects for home delivery of diesel

petrol diesel fuel prices

The Petroleum and Explosives Safety Organisation (PESO) has increased pilot projects for home delivery of diesel.

In April 2017, oil minister Dharmendra Pradhan had said that the government is looking at options to deliver diesel at doorstep. More than a year later, three pilot projects are being run by the oil marketing companies (OMCs) such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) in cities like Pune, Rewadi and Navi Mumbai.

CNBC-TV18 learns that the PESO has doubled the license for doorstep delivery of diesel from 24 to 50. The government is not happy with the OMCs as they are yet to submit a proposal on a full rollout of these schemes.

The government is eager to expedite the full rollout of diesel home delivery, which will initially target high consuming diesel dependence like shopping malls, genset owners and transportation business.

 

5 Minutes Read

Indian Oil second-quarter profit drops 12.2% on higher forex, raw material costs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

State-run refiner Indian Oil Corp Ltd posted a 12.2 percent fall in second-quarter profit on Friday, missing estimate by a wide margin, dented by forex expenses and raw material costs. Net profit came in at Rs 3,247 crore in the quarter ended September 30, compared with Rs 3,696 crore a year earlier, IOC said. Analysts …

Continue reading “Indian Oil second-quarter profit drops 12.2% on higher forex, raw material costs”

State-run refiner Indian Oil Corp Ltd posted a 12.2 percent fall in second-quarter profit on Friday, missing estimate by a wide margin, dented by forex expenses and raw material costs.

Net profit came in at Rs 3,247 crore in the quarter ended September 30, compared with Rs 3,696 crore a year earlier, IOC said.

Analysts on average had expected a profit of Rs 5,088 crore, according to Refinitiv data.

Average gross refining margin for the April-Sept period – the difference between the cost of crude oil processed and the prices of refined products – dropped to $8.45 per barrel from $6.08 per barrel a year earlier.

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Tags

#Russia #Ukraine #UkraineRussiaWar #Sievierodonetsk #RussiaAttack #Global #World #HelpRussia

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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today's market

Global Top Gainers Top Loosers nifty sensex
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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IOC Q2 results preview: Profit likely to fall 30%

Analysts are expecting a weak set of numbers from Indian Oil Corp (IOC) on Friday following disappointing earnings from its peers Bharat Petrol Corp and Hindustan Petroleum Corp.

  • The crude prices were up $1 per bbl on a quarter on quarter basis and around $23 per bbl on a year on year basis. All this will be hurting the margins, also the rupee depreciation is something that will not be good for the company, so in terms of revenue we are expecting a growth of 5.5 percent odd, EBITDA is expected to decline by about 26 percent odd, operating profit margin should be seeing a decline of 270 basis points, all this leading to a profit decline of around 30 percent odd.
  • The major number to watch out for are gross refinery margins (GRM), expected at $8 per bbl – that would mean sequential decline of around 21 percent odd and a flat GRM on YoY basis.

 

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SP Tulsian takes positive view on all FMCG stocks

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 6, 2018. REUTERS/Brendan McDermid

SP Tulsian of sptulsian.com on Friday said he is extremely positive on all the fast moving consumer goods (FMCG) stocks going forward.

He spoke at length on stocks like Hindustan Unilever Ltd (HUL), GM Breweries, Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL), Indian Oil Corporation (IOC), Oil and Natural Gas Corporation (ONGC), GAIL, Petronet LNG and non-banking financial stocks (NBFCs) like Bajaj Finance, Shriram Transport Finance, L&T Housing Finance and Mahindra and Mahindra Finance.

“I don’t think there will be any kind of disappointment with the HUL’s results. But overall, the kind of corrections which we have seen in the valuation of FMCGs making it a good buy as well,” Tulsian said.

“We have been keeping the positive view on many of the FMCG stocks like Godrej Consumer, Britannia Industries, Nestle, HUL, Jubilant Foodworks, Asian Paints, which may not be strictly FMCG, but discretionary spending. So all these stocks are now looking good,” he added.

Tulsian further said, “We have been advising to buy all three oil marketing companies (OMCs) stocks only from an investment point of view with a longer horizon of 4-6 months.”

“So maybe, if you have an investor horizon, I won’t be taking a short-term call. Look to buy dip of about 4-5 percent across the board for all three OMCs,” said Tulsian.

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Mitessh Thakkar on September 5: Sell ICICI Prudential Life Insurance, IOC, Just Dial

The latest analysis and commentary by stock market guru Mitessh Thakkar on what is moving the markets today.

He also spoke at length on ICICI Prudential Life Insurance, Indian Oil Corporation (IOC), ITC, Just Dial & Reliance Infrastructure.

Follow stock recommendations by Mitessh Thakkar here: https://www.cnbctv18.com/author/mitessh-mthakkar-111/

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