Petrol, diesel prices rise again: Will 2022's 90-paise hike formula return?

State-run oil companies have raised petrol and diesel prices again across major cities. The move has revived talk of a 2022-style pattern of small, frequent fuel hikes.

In Short

• Petrol and diesel prices hiked again amid high crude oil costs
• State firms raised rates twice in five days, petrol up by ~90 paise
• Delhi petrol at Rs 98.64/litre, diesel Rs 91.58/litre after hike

Petrol and diesel prices in India have gone up again, reviving memories of 2022 when fuel rates were increased almost every day in small amounts over a two-week period.

With global crude oil prices staying elevated due to tensions in West Asia and disruptions around the Strait of Hormuz, experts now believe oil marketing companies may once again opt for the “small but frequent hike” strategy to recover mounting losses.

State-run oil companies raised petrol and diesel prices for the second time in five days on Tuesday. Petrol prices were increased by around 90 paise per litre across major cities, while diesel prices also saw a similar hike.

In Delhi, petrol now costs Rs 98.64 per litre, up by 87 paise, while diesel has risen by 91 paise to Rs 91.58 per litre. In Mumbai, petrol is now priced at Rs 107.59 per litre and diesel at Rs 94.08 per litre. Similar increases have been seen in Kolkata and Chennai as well.

The latest hikes come after an earlier increase of Rs 3 per litre announced last week, as oil companies struggle to cope with rising global crude prices.

WHY 2022 IS BEING DISCUSSED AGAIN

The current pattern is drawing comparisons with 2022, when petrol and diesel prices were revised 13 times in around 15 days following the Russia-Ukraine war. At that time, oil companies avoided a one-time sharp jump and instead raised prices gradually, mostly by around 80 paise per litre daily.

Analysts say a similar formula could now return.

The reason is simple. International crude oil prices remain above 110 dollars per barrel despite some correction, while disruptions in West Asia have increased concerns over energy supplies. India imports a large part of its crude oil needs, making domestic fuel prices highly sensitive to global developments.

Experts believe the Rs 3 per litre increase announced earlier may not be enough to offset losses faced by oil marketing companies.

Gurmeet Singh Chawla, Managing Director at Master Portfolio Services Ltd, said if Brent crude remains above 100 dollars per barrel for an extended period, fuel prices may continue to rise over the next three to four months.

Oil marketing companies such as Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) are reportedly facing heavy losses after holding retail fuel prices steady despite the surge in crude oil costs.

According to industry estimates cited in recent reports, state-run oil firms were losing around Rs 1,600 crore to Rs 1,700 crore daily before the recent hikes.

Energy analyst Dhaval Popat said a Re 1 increase per litre can improve the annual EBITDA of the three state-run oil companies by around Rs 15,000 crore to Rs 16,000 crore collectively. However, if crude prices remain elevated for longer, companies may still require a cumulative increase of nearly Rs 10 per litre to fully offset losses.

WHY SMALL HIKES ARE PREFERRED

Industry observers say oil companies usually prefer gradual increases instead of a sudden large hike because smaller revisions create less public backlash and help spread the burden over time.

Fuel prices in India were earlier controlled by the government and revised every 15 days. However, after deregulation, oil companies gained the freedom to revise prices based on market conditions.

Despite that flexibility, companies have historically avoided steep one-time increases during crises and instead chosen phased revisions.

That is why market watchers believe the current 90-paise increase may not be the last if crude oil prices remain high and the West Asia situation continues to affect global energy supply chains.

- Ends