Highlights – Companies are getting cheap oil, so why aren’t petrol and diesel prices falling for the common man ?
Despite the fall in crude oil prices, retail prices of petrol and diesel remain stable. Oil marketing companies (OMCs) are directly benefiting from this. According to Crisil, their operating profit could increase by more than 50% this fiscal year, reaching $20 per barrel. Companies are earning record profits of around ₹8 per liter from marketing margins, but the general public is not receiving this benefit.
Crude oil prices are softening in the international market, and oil companies are making huge profits. Yet, why are petrol and diesel prices not falling ? On one hand, the coffers of oil marketing companies (OMCs) are filling up, while on the other, the common consumer in India is suffering the brunt of inflation. A recent report by the credit rating agency Crisil indicates that the operating profit of oil companies is expected to increase by more than 50% this fiscal year, reaching $18-20 per barrel. This profit is expected to be at a record level, but its benefits are not reaching the public.
Oil Companies Are Making Double Profits
Oil marketing companies primarily operate through two businesses: refining and marketing. In refining, they convert crude oil into fuels like petrol and diesel, earning a gross refining margin (GRM). The second is marketing, i.e., selling the finished fuel, on which they earn a marketing margin. According to Crisil, marketing margins are set to improve significantly this year, more than offsetting the potential decline in refining margins. International crude oil prices are expected to soften to $65-67 per barrel, providing companies with lower raw materials. Meanwhile, due to slowing global demand, refining margins may remain modest at $4-6 per barrel. But the real game lies in marketing.
Petrol and diesel prices in the country remain relatively stable. No price reductions have been made. Due to this stability, marketing margins are expected to reach $14 per barrel (approximately ₹8 per liter). This marketing margin is so large that companies’ overall operating margins will skyrocket. Last year, when crude oil prices were $83 per barrel, companies’ operating profits peaked at $20 per barrel. This trend is expected this year as well. It is important for the public to understand that even if crude oil becomes cheaper in the international market, if domestic retail prices do not decrease, oil companies directly benefit significantly.
Are past losses being recouped?
The answer to why oil companies are experiencing such a significant jump in earnings lies in their performance over the past five years. In the past five fiscal years, when global geopolitical instability caused highly volatile crude oil prices and limited domestic prices, companies’ margins were severely impacted.
According to a report in the Financial Express, in fiscal year 2023, when crude oil averaged $93 per barrel, companies’ operating profits fell to just $0.13 per barrel, resulting in significant losses. However, oil companies’ long-term operating profits have remained normal, hovering around $11 per barrel. In the current fiscal year 2025, companies earned an operating profit of $12 per barrel even when crude oil prices were $79 per barrel.
Experts believe that companies are now recouping past losses and preparing themselves for future large capital expenditures (Capex). This year’s strong profitability is expected to boost companies’ total cash accruals to ₹75,000-₹80,000 crore, up from ₹55,000 crore last year. Using this capital, these companies are planning significant capital expenditures of ₹90,000 crore for brownfield capacity expansion (i.e., increasing the capacity of existing plants). According to Crisil, improved earnings will reduce their dependence on external debt and improve their credit profiles.
