[TusharK]

India’s oil marketing companies (OMCs) are experiencing a significant boost in profits from petrol and diesel. According to ICRA, Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) are making a profit of Rs 15/litre on petrol and Rs 12/litre on diesel.



As per the report, the marketing margins of OMCs have improved significantly in recent months due to a fall in crude oil prices, and retail prices of fuels have been steady since March 2024. This has given OMCs ample room to pass on these profits to consumers by reducing the prices of petrol and diesel.

The combined profit of India OMCs jumped to Rs 86,000 crore in FY2023-24. HPCL reported a net profit of Rs 16,014 crore, compared to a loss of Rs 6,980 crore in the previous year. BPCL’s profit jumped by 13% to Rs 26,673 crore, while IOCL registered its highest-ever refinery throughput, sales volume and net profit.

Source: ET Now

Link to Team-BHP news

[aniketi]

We are used to current fuel prices now, instead of decreasing the fuel prices I think government should keep prices constant for next few years. It will also help in keeping inflation in check which will help GDP and RBI to make decisions as well. No point in reducing 3-4 Rs for now and again increasing after some time.

[SmartCat]

Originally Posted by TusharK

This has given OMCs ample room to pass on these profits to consumers by reducing the prices of petrol and diesel.

To expect OMCs to "pass on" profits to people sounds so communist. They need to keep the profits & reinvest to increase refinery capacity. Eg:

BPCL to invest Rs 1.7 lakh crore in next 5 years
https://indianexpress.com/article/bu...years-9521270/

If Govt wants lower prices for petrol/diesel, they do have the option of reducing taxes.

[ABHI_1512]

Originally Posted by SmartCat

To expect OMCs to "pass on" profits to people sounds so communist. They need to keep the profits & reinvest to increase refinery capacity.


If Govt wants lower prices for petrol/diesel, they do have the option of reducing taxes.

I don’t think OMC’s are independent enough to decide on the retail fuel prices. We always knew that the OMC’s are making good amount of money since oil prices have stabilised for a long time now but, at least a figure has been arrived at.

So basically everyone is making money including the government barring the people of the country, who are only paying through their noses. Nice economics I say.

Also, just a thought came to my mind, the private retailers like Reliance and Nayara are selling at the same price as OMC’s. I wonder how much profit they are making ?

And yes, agree to your view that taxes should be reduced.

[Turbanator]

Originally Posted by SmartCat

To expect OMCs to "pass on" profits to people sounds so communist. They need to keep the profits & reinvest to increase refinery capacity.

It’s great to see businesses thriving like this! wish we had invested in shares of Oil companies, rather in our work where we have to work at 1-2% margins

On a different note, it seems like everyone has accepted the higher fuel prices, tolls, poor roads, and other infrastructure issues *sigh*

[ashis89]

Originally Posted by ABHI_1512

Also, just a thought came to my mind, the private retailers like Reliance and Nayara are selling at the same price as OMC’s. I wonder how much profit they are making ?

And yes, agree to your view that taxes should be reduced.

Great point!

Probing one step further, why does Shell still charge a premium compared to the OMC prices? I haven't checked their recent prices but it was higher until 1.5 month ago.

[SmartCat]

Originally Posted by ABHI_1512

I don’t think OMC’s are independent enough to decide on the retail fuel prices.

I suspect they have just enough price freedom to ensure that they will make some profits and not ever depend on Govt bailouts like in the past.

Whenever a very large power plant is set up, the prices are set such that it makes a long term Return on Equity of 15%, as per the Electricity Act. It is quite likely that OMCs too have a similar profitability model.

We always knew that the OMC’s are making good amount of money since oil prices have stabilised for a long time now but, at least a figure has been arrived at.

All OMCs are listed on the stock market, so everybody knows how much profits they make every year. And one can guess they are making good profits on petrol/diesel sales by looking at OPM % (operating profit margins) numbers



All OMCs have petrochemical/aviation/other fuels business too. So entire profits & margins is not from petrol/diesel sales.

Also, just a thought came to my mind, the private retailers like Reliance and Nayara are selling at the same price as OMC’s. I wonder how much profit they are making ?

Compared to profits Reliance/Nayara (ex-Essar) made by importing crude oil from Russia and selling petrol/diesel to Europe, their India profits will be like pocket money.

Originally Posted by ashis89

Probing one step further, why does Shell still charge a premium compared to the OMC prices? I haven't checked their recent prices but it was higher until 1.5 month ago.

Shell buys petrol/diesel from Indian Oil/BPCL/HPCL/Reliance at wholesale rates and sells it to customers. So there will always be a premium.

[AMG Power]

Originally Posted by Turbanator

On a different note, it seems like everyone has accepted the higher fuel prices, tolls, poor roads, and other infrastructure issues *sigh*

And now with daily price updation no one can check whether the price charged is the updated one or the earlier price.

An outlet can just omit to update a reduction in price and no one has the time or inclination to verify whether the price being charged is what should actually be charged.

Daily updation of prices is a racket in disguise.

[ashis89]

Originally Posted by SmartCat

Shell buys petrol/diesel from Indian Oil/BPCL/HPCL/Reliance at wholesale rates and sells it to customers. So there will always be a premium.

Oh yes. I had forgotten that Shell doesn't have their own refinery. But what about Nayara, do they refine their own fuel? They are selling fuel cheaper than even the OMCs in a few places.

[Turbanator]

Originally Posted by ashis89

But what about Nayara, do they refine their own fuel?

Yes, old Essar Refinery in Gujarat.

https://www.nayaraenergy.com/vadinar...ayara%20Energy.

[NomadSK]

Originally Posted by ABHI_1512

Also, just a thought came to my mind, the private retailers like Reliance and Nayara are selling at the same price as OMC’s. I wonder how much profit they are making ?

Reliance refinery is among the most technological refineries in the world (even better than American refineries), they can process the worst (sourest, high on sulfur content) crude available in the market and hence they buy (yes on daily basis) the cheapest available crude in the market, be it from Iran/Venezuela/Russia/Saudi etc, making their profit margins even higher. They have number of tanks more than 100m dia for storing this crude and using it in future. OMC and Reliance profit margins cannot be compared, since the cost of source crude for processing is considerably different for both. Eg one would be buying crude at 75-80$ the other would be buying at 45-50$ at the same time.

The problem with OMC's is their refineries are pretty old and aren't that advanced, barring few, hence are forced to refine the sweet crude with low sulfur content else they will have corrosion related issues in their processes. If the OMC's will start to process the crude, which reliance processes, their refineries will be shut down within months.

OT, Fun-fact - IAF jets at Jamnagar aren't allowed to fly over the Reliance refinery.

[Abbas]

Originally Posted by NomadSK

OT, Fun-fact - IAF jets at Jamnagar aren't allowed to fly over the Reliance refinery.

You cannot fly over any refinery. Its a No-Fly zone !

[Mystic]

Retailers of gas stations in USA and Saudi make a very small margin less than 2%. Our Indian gas station owners are making a lot of money comparatively.

It is interesting to know that the lowest cost of 0.02 USD per liter of petrol is in Venezuela and highest of 3.28 in Hong Kong. I think Government has a big say in petrol prices everywhere.


https://tradingeconomics.com/country...ontinent=world

[NomadSK]

Originally Posted by Abbas

You cannot fly over any refinery. Its a No-Fly zone !

I'm not sure, If all refineries comes under No-fly zone for jets/aircraft, because some of them are so small, that it won't make sense to mark them as prohibited/restricted air space. For Drones, yes they might be no-fly zones.

I could see only Mathura refinery on this list and a part of Jamnagar.

Source

[ashis89]

Originally Posted by Mystic

Retailers of gas stations in USA and Saudi make a very small margin less than 2%. Our Indian gas station owners are making a lot of money comparatively.

As far as I know, a fuel bunk owner gets about 2-3 rupees as commission per liter of fuel they sell. The more they sell, the more profit they make. For petrol and diesel which are priced in the 90-110 range, the margin would be a similar 2-3%.

PS: there’s also an operate model where a person operates the COCO bunks for respective OMCs. There the margin per liter is lesser (but investment is also lesser).