The share price of major oil marketing companies (OMCs) are in the red today May 15 after petrol and diesel prices were increased for the first time in nearly four years.
The latest development has brought companies such as Hindustan Petroleum Corporation, Bharat Petroleum Corporation and Indian Oil Corporation into the spotlight. This is because, with this fresh announcements, investors will also assess the impact of the fuel price revision on company earnings and the broader energy sector.
Along with oil marketing companies, refinery and energy-related stocks such as Reliance Industries and Oil India may also remain on investors’ radar in today’s trading session.
At this hour, the share price of Hindustan Petroleum Corporation was trading nearly 2% lower, while Bharat Petroleum Corporation declined around 2% and Indian Oil Corporation slipped over 1%.
The share price of Reliance Industries was also down nearly 1% in early trade.
The government-backed oil companies increased petrol and diesel prices by around Rs 3 per litre after keeping rates largely unchanged since March 2024.
Fuel prices rise after long freeze
The latest revision marks the first major fuel price increase after a long gap, ending a period during which retail fuel prices remained stable despite sharp volatility in global crude oil markets.
Following the price hike, petrol in Delhi is now being sold at Rs 97.77 per litre, while diesel prices have moved up to Rs 90.67 per litre.
In Kolkata, petrol prices have increased to Rs 108.74 per litre, while diesel prices stand at Rs 95.13 per litre. Chennai has also seen higher fuel rates, with petrol priced at Rs 103.67 per litre and diesel at Rs 95.25 per litre.
Fuel prices continue to differ across states because of varying Value Added Tax rates imposed by local governments.
“The modest hike in retail price of Rs. 3/liter for petrol and diesel provides limited relief to the oil marketing companies. ICRA estimates that at crude price of $105-110/barrel and considering past 10-year average crack spreads of auto fuels, oil marketing companies incur a loss of about Rs 500 crore daily on the sale of auto fuels and domestic LPG, even after factoring the fuel price hike. Accordingly the oil marketing companies would need to relook at the retail prices in case elevated crude oil prices persist,” Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA.
Why oil companies were under pressure
According to government estimates, public sector oil marketing companies had been facing heavy losses because of rising global crude oil prices and unchanged retail fuel prices in India.
The rising global crude oil prices had put pressure on state-run oil marketing companies such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, as retail fuel prices in India remained unchanged for a long period.
The government estimated that these companies were losing around Rs 20 per litre on petrol sales and nearly Rs 100 per litre on diesel.
Earlier this year, the Finance Ministry had also reduced excise duty on petrol and diesel by Rs 10 per litre in an attempt to reduce the burden on consumers and avoid a sharp retail fuel price increase.
Crude oil prices and West Asia tension remain in focus
Another key factor that is impacting the fuel prices are the movement in global crude oil markets.
In the early trade today, crude oil prices continued to trade higher. This is because of the ongoing concerns around supply disruptions and geopolitical tension in West Asia.
In early trade, West Texas Intermediate crude oil surged around 0.84% to $102.01 per barrel. Similarly, the Brent crude climbed 0.83% to around $106.59 per barrel .However, oil has surged over 40% between February 28 and now.
This ongoing tension in West Asia has kept global energy markets volatile. This has lead to concerns over supply shortages and rising import costs for oil-dependent countries such as India.
Which sectors may get impacted now?
The recent hike in the fuel price may also have a secondary impact on several sectors apart from the oil marketing companies.
For instance, transport and logistics companies may face higher operating costs because of increased diesel prices.
Similarly, aviation companies may also continue to monitor fuel-related expenses closely.
The election timing is drawing attention
The timing of the fuel price increase has also become a key talking point in the market.
The latest revision comes shortly after the conclusion of assembly elections in states such as Assam, Kerala, Tamil Nadu and West Bengal. Voting across these states ended on April 29.
Fuel prices in India are technically deregulated, which means oil marketing companies can revise rates daily based on global crude oil movements and currency fluctuations. However, price revisions are state specific and various factors go intp play, in terms of the final price revision.
Interestingly, fuel prices were last reduced by Rs 2 per litre ahead of the 2024 Lok Sabha elections.
What investors should track next
With petrol and diesel prices finally revised after years of stability, the performance of oil marketing stock performance will be closely watched as it may also depend on future government policy decisions, crude oil movements and the overall geopolitical situation in West Asia.
For now, the fuel price revision has pushed the energy sector into market focus.