Oil Companies Strengthens Margins as Consumers Suffer High Fuel Price

Oil Companies Strengthens Margins as Consumers Suffer High Fuel Price
Image Source - Google | Image by dtnext

After the historic rise in fuel price in the country, the margin taken by the oil marketing companies on the retail sale of diesel and petrol has reached a high of over Rs. 3/litre. The hike in the fuel may be hitting hard the consumers but the oil companies are making the most out of this situation and making profits. The oil marketing companies are increasing their profits while burning the consumers’ pockets.

According to a report of Motilal Oswal Financial Services, OMCs are earning oil marketing margins of Rs. 2.8 to Rs. 3.6 per litre on diesel and petrol. This time their margin is higher than their long-term average margin of Rs. 3 per litre. The companies are still raising the prices of diesel and petrol in phases that will give a further boost to their revenue and profits.

“Margins are related to refinery gate prices at which marketing companies get products for sale at pumps. If this falls, the actual marketing margins rise. With PSU oil cos doing both refining and marketing, the development is neutral on their earnings,” OMCs sources told DT Next.

The government and oil companies are using margins on auto fuels as a key tool to manage their finances. In FY 2019-20, the companies had increased gross marketing margins to Rs. 3 – Rs. 5 per litre.

Written by Hardik Tokas

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