NEW DELHI: Selling petrol and diesel has become increasingly costly for India’s oil marketing companies (OMCs). A Jefferies report estimated that they are losing Rs 26 on every litre of petrol and Rs 30 on diesel as the Middle East conflict drives up crude procurement and shipping costs.The estimates, based on 15-day average prices, point to a widening gap between what fuel retailers spend on procuring crude and what they recover through domestic fuel sales.In its report, “Energy Market Letter: Volume XXII”, Jefferies said the cost of procuring crude for Indian OMCs was comparable to an Indian crude basket price of $125 per barrel.“Marketing margins deep in the red: Procurement cost for OMCs is similar to the Indian crude basket price of US$ 125/bbl, leading to steep losses,” the report stated, as cited by ANI.A major factor behind the squeeze is the surge in freight costs, which have risen eightfold since the conflict began. Shipping now makes up more than a quarter of the landed cost of crude oil, against just 3 per cent before the war.Jefferies said freight rates had climbed another 8 per cent over the past week, adding to the cost of bringing oil into India.The pressure has been compounded by a fresh disruption to crude shipments from the Middle East. Excluding Iran, oil flows from the region have fallen to around 75 per cent of pre-war levels, compared with approximately 95 per cent at the end of September.“Overall flows (ex-Iran) have declined to ~75% of pre-war level (~95% at end-Sep) due to heightened attacks in the Gulf of Oman,” Jefferies said.The figures suggest that the recovery in regional oil shipments seen towards the end of September has reversed, leaving import-dependent countries such as India exposed to higher supply and transportation costs.While Jefferies noted that refining margins remain elevated, the benefit is being offset on the fuel marketing side by the higher cost of crude procurement.For Indian OMCs, the immediate challenge is therefore not just the price of crude oil, but also the sharply higher cost of transporting it. Continued disruptions to Middle Eastern supplies could keep marketing margins under pressure even if refining operations remain profitable.
