Moody’s Investors Service said on Thursday that India’s top fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (Hindustan Petroleum) Corporation Limited (HPCL) has incurred a loss of around $2.25 billion (Rs 19,000 crore) due to keeping petrol and diesel prices unchanged despite a sharp rise in crude oil prices in March.
Crude oil (the raw material for fuel production) prices have averaged around $111 a barrel in the first three weeks of March, compared to about $82 in early November. Despite this, the prices of petrol and diesel remained unchanged between November 4, 2021 and March 21.
State-run Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) hiked petrol and diesel prices by 80 paise per liter on March 22 and 23, but stopped the hike on Thursday.
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Moody’s said in a report, “Based on current market prices, OMCs are currently incurring losses of around $25 (over Rs 1,900) per barrel on petrol sales and $24 per barrel on diesel sales. “
The report said that unless fuel prices are increased and if crude oil prices remain on average around $111 a barrel, the sale of petrol and diesel to the three rated companies IOC, BPCL and HPCL But in total there will be a daily loss of about 65-70 million dollars.
“Based on our estimates of average sales volume between November and the first three weeks of March, government refining and marketing companies lost approximately $2.25 billion on petrol and diesel sales,” Moody’s said.
However, the increased oil prices will have a mixed impact on the sector.
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On one hand, upstream oil and gas producers like ONGC and OIL will benefit from higher earnings. On the other hand, downstream companies like IOC, BPCL and HPCL will be negatively impacted due to higher feedstock cost and increase in working capital.
As oil prices continue to rise, it will encourage consumers to move to other energy sources.
At the same time, it has also been said in the report that as and when absolute demand starts falling, India will first reduce imports before reducing domestic production.
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