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| Oil Marketers : Margins may slip |
| Shobhana Subramanian / Mumbai Jun 09, 2009, 00:49 IST |
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With the government yet to decide on whether prices of petrol and diesel will be freed, oil marketing companies run the risk of losing money on retail sales.
 According to industry watchers with crude oil prices having risen sharply to around $ 67 per barrel---a rise of nearly 40 per cent since the start of April, 2009—the cost of production of auto fuels has gone up.
However, retail prices remain unchanged and as such, the second half of June could see auto fuel marketing margins fall further. Merrill Lynch estimates that selling prices would need to be upped by between 12-18 per cent to bring auto fuel margins to normal levels and eliminate losses. It points out that margins for petrol have been in the red since April 2009 but are likely slump further to nearly Rs 5 per litre.
Besides, margins for diesel, which were positive but were falling , too could contract in the second half of this month.
Unless the government’s decision comes through soon, the earnings outlook for oil marketing companies will deteriorate sharply. In the March 2009 quarter, retailers such as Indian Oil Corporation (IOC) enjoyed fairly good margins on petrol and diesel since prices of crude oil were lower by about 55 per cent year-on-year.
However, they lost money on kerosene and LPG. IOC, BPCL and HPCL have underperformed the benchmark indices since the start of the year and are likely to do so till such time that the government takes a decision on freeing up retail prices.
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