Petrol, Diesel Rates Need To Rise Rs 12 To Match Crude Price Surge: ICICI Securities

For the first time in nine years on Thursday, global crude oil prices shot above $120 a barrel before retreating a little to $111 on Friday

New Delhi: Petrol and diesel rates, left untouched for the past four months in view of Assembly elections, need to be raised by over Rs 12 a litre by March 16 for fuel retailers to break even, quoting ICICI Securities, the PTI reported.

For the first time in nine years on Thursday, global crude oil prices shot above $120 a barrel before retreating a little to $111 on Friday, but the gulf between cost and retail rates has only widened.

ICICI Securities in its report said that with international oil prices, on which domestic fuel retails are directly linked, soaring in the past two months, state-owned fuel retailers need a massive rate hike of Rs 12.1 per litre on or before March 16, 2022, just to breakeven and a price hike of Rs 15.1 is required after including margins for oil firms.

According to information from the Petroleum Planning and Analysis Cell (PPAC), the basket of crude oil India buys rose to $117.39 per barrel on March 3, the highest since 2012. This compares to an average of $81.5 per barrel price of the Indian basket of crude oil at the time of freezing of petrol and diesel prices in early November last year.

JP Morgan in a report said,"With state elections getting over next week, we expect daily fuel price hikes to restart across both gasoline and diesel."

The seventh and final phase of polling for the Uttar Pradesh legislative Assembly is on March 7 and the counting of votes is slated for March 10.

Crude prices have been on the boil ever since Russia invaded Ukraine. They spiked after it invaded the central Asian nation on fears that oil and gas supplies from energy giant Russia could be disrupted, either by the conflict in Ukraine or retaliatory western sanctions.

"Auto fuel net marketing margin is minus Rs 4.92 per litre on March 3, 2022, and Rs 1.61 in Q4 FY22-to-date," ICICI Securities said. "However, net margin is likely to plummet to minus Rs 10.1 per litre on March 16 and minus Rs 12.6 on April 1 at latest international auto fuel prices."

The brokerage said, "Steep price hikes are required as the strength in gross refining margins does not suffice for sharp quarter-on-quarter fall in net auto fuel marketing margin."