- Indian refiners still processing costlier crude purchased previously.
- Public sector OMCs incurred heavy losses covering past costs.
- Retail fuel cuts contingent on global crude remaining subdued.
International crude oil prices have fallen sharply from the highs seen during the West Asia conflict, raising hopes that petrol and diesel prices in India could also become cheaper. However, a cut in retail fuel prices is unlikely in the immediate future, with Oil Minister Hardeep Singh Puri saying state-run refiners are still processing costlier crude purchased during the peak of the geopolitical crisis.
According to PTI, the minister indicated that while lower crude prices provide room for a future reduction in retail fuel prices, any decision would depend on whether global oil prices remain subdued for a sustained period.
Crude Prices Have Dropped, But Refiners Still Using Costlier Oil
Global crude oil prices have retreated over the past few weeks following an interim peace agreement between the United States and Iran, easing concerns over disruptions to oil shipments through the Strait of Hormuz.
Crude, which had climbed to around $119 per barrel during the height of the conflict, is now trading near $70 per barrel.
Despite the decline, Puri explained that Indian refiners are currently processing crude oil that was purchased two to two-and-a-half months ago, when prices, freight charges and insurance costs were significantly higher.
“That crude would have been obtained two months back (when) prices were high, cost of insurance was high, cost of freight was high,” Puri said.
He added that crude bought at today’s lower prices will only reach refineries later, delaying any immediate impact on fuel prices at the pump.
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When Could Petrol and Diesel Prices Be Reduced?
According to the minister, retail fuel prices could be reviewed if international crude continues to remain at lower levels.
“If it (oil prices) remains like this (at current rates), it (cutting retail prices) is a legitimate thing,” Puri said, as quoted by PTI.
His comments come after petrol and diesel prices were increased by around Rs 7.50 per litre each during the second half of May. The hike came more than two months after the West Asia conflict began and reflected only part of the increase in global fuel costs.
As a result, state-run oil marketing companies (OMCs) absorbed a significant share of the higher input costs.
OMCs Continue to Recover From Heavy Losses
According to the minister, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) together incurred losses of Rs 74,781 crore on the sale of petrol, diesel and subsidised LPG.
The figure includes losses from selling petrol and diesel below cost for nearly four months following the outbreak of the West Asia conflict, as well as unrecovered subsidies on domestic LPG.
The delayed pass-through of higher crude prices meant public sector fuel retailers absorbed a substantial financial burden even as global oil prices have now corrected.
India Maintained Fuel Supplies During the Crisis
Puri said India managed to avoid fuel shortages during the conflict by diversifying crude oil imports across multiple regions and increasing LPG purchases from the United States.
He noted that no retail fuel outlet in the country ran dry despite several neighbouring countries resorting to fuel rationing.
“Every one of our refineries is stocked, every port, terminal, pipeline, and depot is stocked. In all, we have stocks to cover the country’s requirement for 76-80 days,” Puri said.
He added that India would continue expanding its strategic storage capacity while strengthening bilateral energy partnerships.
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Private Retailer Has Already Cut Prices
The minister also referred to Nayara Energy’s recent decision to reduce petrol prices by Rs 5 per litre and diesel prices by Rs 3 per litre.
According to Puri, the move effectively reversed the price increases implemented by the private retailer in March. He added that Nayara had subsequently matched the price hikes undertaken by state-run OMCs in May, meaning its latest reduction has broadly aligned retail prices with those charged by public sector fuel retailers.
Experts See Scope for Price Cuts if Crude Remains Soft
Industry experts believe the recent decline in global crude oil prices creates favourable conditions for lower retail fuel prices, although consumers may have to wait.
Shiva Grover, Founder of Equitrust Solutions, said a sustained fall in Brent crude to around $60-65 per barrel, coupled with a stable rupee, could create room for a Rs 2-4 per litre reduction in petrol and diesel prices over the next one to two months.
However, he noted that the extent of any reduction would depend on several factors, including government tax policy, exchange rate movements and pricing decisions taken by oil marketing companies.
Why Lower Fuel Prices Matter
Grover said lower fuel prices would have benefits beyond reducing household fuel bills.
He believes softer fuel prices could help ease retail inflation, lower transportation and logistics costs, and improve disposable incomes, potentially supporting consumer spending.
From an investment perspective, he said automobiles, FMCG, retail, aviation, logistics and selected manufacturing sectors could benefit if energy prices remain moderate.
At the same time, he cautioned that crude oil is only one part of the broader economic picture.
According to Grover, the outlook for Indian equities will also depend on domestic demand, corporate earnings, monetary policy and global economic conditions. If crude prices remain benign alongside stable macroeconomic fundamentals, overall sentiment for consumption-driven sectors could strengthen during the second half of the year.
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