Crude Oil Prices Affect Indian OMCs

Current Situation:

• The public sector oil marketing companies (OMCs) in India—Indian Oil, Bharat Petroleum, and Hindustan Petroleum—are suffering losses due to a surge in global crude oil prices influenced by geopolitical tensions in West Asia.
• Estimated losses per litre: Rs 9 on diesel, Rs 8 on petrol, and Rs 300 per cylinder on domestic LPG.
• Daily losses for OMCs approximately amount to Rs 530 crore.

Economic Projections:

• If crude oil prices stay above $105 per barrel, projected under-recoveries for petrol and diesel may exceed Rs 64,000 crore for FY 2026-27.
• Combined under-recoveries for LPG could surpass Rs 1 lakh crore this financial year if current trends persist.

Crude Oil Price Data:

• Indian crude basket climbed to $117.4 per barrel as of September 21, 2026, compared to an average of $66 in the previous fiscal year.
• Price hikes for petrol and diesel last occurred in May 2026, with a total increase of Rs 7.35 per litre for petrol and Rs 7.53 per litre for diesel.

Financial Health of OMCs:

• The three major OMCs control around 90% of India's petrol and diesel retail market and are the sole entities supplying LPG.
• In the April-June quarter of 2026, OMCs reported a net loss of over Rs 18,000 crore.
• Marketing losses are expanding again due to high international prices.

Policy and Government Response:

• The Indian government generally avoids compensating OMCs for losses from petrol and diesel, which are deregulated.
• For regulated LPG pricing, the government has provided financial grants to mitigate losses in recent years.
• The cumulative negative buffer for LPG reached Rs 61,940 crore as of June 30, 2026, with under-recoveries of Rs 500 and Rs 300 per cylinder reported for the June quarter and September 2026, respectively.

Operational Insights:

• OMCs break even when crude prices range between $85-$90 per barrel; prices above this level without corresponding fuel price hikes lead to significant operational losses.
• Despite high gross refining margins (GRMs), the benefits do not entirely offset marketing and operational losses.
• GRMs were noted to be above $10 per barrel since the escalation of the West Asia crisis.

Future Projections Based on Oil Prices:

• If Brent crude prices average between $105-$115 per barrel, OMCs could incur under-recoveries of around Rs 64,000 crore.
• A price hike of Rs 4-6 per litre is estimated to neutralise marketing losses at these price levels.
• Under certain price scenarios (e.g., Brent prices averaging $130-$140), under-recoveries might escalate to approximately Rs 1.9 lakh crore.

Conclusion:

• The financial health of OMCs is critically linked to international crude oil prices, the government's approach to regulating fuel prices, and the overall economic conditions driven by geopolitical crises in oil-producing regions. Continuous monitoring and potential policy adjustments may be necessary to safeguard the viability of OMCs amidst fluctuating market conditions.