Oil Cos strengthen profits as consumers suffer from high fuel prices

Sarkaritel
By Sarkaritel September 2, 2021 22:09

Oil Cos strengthen profits as consumers suffer from high fuel prices


New Delhi, Sep 2 (IANS) The oil price rise may have hit the fuel consumers hard, but it is the oil companies that have made the most from the current situation, strengthening their margin on the sale of petrol and diesel and jacking up profits.

At the current prevailing high fuel price levels in the country, the marketing margin taken by the oil marketing companies (OMCs) on retail sale of petrol and diesel has touched a high of around Rs 3 per litre.

What this means is that while rising fuel prices earlier burned a bigger hole in the consumers’ pockets, the OMCs have increased their earnings and are getting a lift in the current difficult environment created by the Covid-19 pandemic.

According to a research report from ICICI Securities, oil marketing companies are expected to strengthen their earnings in July-September quarter of FY22 on the back of rising marketing margin and improved gross refining margin.

The brokerage said that auto fuel net marketing margin has surged to Rs 3.08 per litre in Q2FY22- till date from Rs 1.43 per litre in Q1FY22 on hefty price hikes and international price fall.

Net margin is at Rs 2.06 a litre in FY22-TD, at Rs 4.42 per litre at latest domestic and international prices, and on track to be in line with, or even higher, than our estimate of Rs 2.5 a litre in FY22E, the brokerage said.

The margins for oil companies have risen as diesel and petrol prices were hiked by Rs 9.3-11.4 per litre respectively since May 3. The fall in international prices from peak also boosted auto fuel net marketing margin that rose above Rs 3 per litre in Q2 of FY22 till date.

ICICI Securities report said though petrol and diesel prices have been cut by Rs 0.50-1.25 per litre since August 18, still companies net margin is on track to be in line with or even higher than estimated Rs 2.5 per litre.

For all the OMCs, the gain is coming in wake of regular revision of retail price of petrol and diesel since the beginning of the financial year. Since then, the pump price of petrol had increased on 41 occasions. This as per analysts may have hurt fuel consumers but has pushed up marketing margins for OMCs back to about Rs 3 a litre. This means companies are gaining from the rise more than expected.

Sarkaritel
By Sarkaritel September 2, 2021 22:09

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