State oil companies lose up to 35% bulk diesel sales
State oil companies are grappling with substantial bulk diesel sales losses as numerous large customers pivot to retail pumps to evade soaring prices. This behavioral shift echoes past trends observed during the US-Iran conflict. The surge in dies...
New Delhi: State-run oil marketing companies are losing 25-35% of bulk diesel sales as many large customers are switching to retail pumps to avoid paying a ₹38-40 per litre premium, mirroring a demand shift seen in the initial stages of the US-Iran war, said people familiar with the matter.
State oil companies price bulk diesel in line with international rates, which have surged again after easing from their April peak. Arab Gulf diesel, the regional benchmark, has averaged $157 a barrel this month, down from $188 in April but about 80% above February levels, widening the gap with retail prices.
Higher crude prices, nearing $100 a barrel, are also inflating diesel rates, but the bigger factor is lost refinery output in Russia and the Gulf. Russian refineries have come under Ukrainian drone attacks, while the near-closure of the Strait of Hormuz has curbed refinery run rates in the Gulf. Both regions are major diesel suppliers, and the production loss is squeezing global supplies.
Domestic refiners haven't raised pump prices since May but continue to revise bulk diesel rates in line with international prices. They cut bulk rates in line with a sharp fall in global oil prices following the US-Iran truce in June but began trending higher as prices recovered. The gap between bulk and retail diesel-around ₹34-35 per litre in August-has since widened to ₹38-40.
In Mumbai, diesel for bulk customers costs about ₹137 a litre, compared with ₹97.8 at retail pumps.
Concerns over fuel diversion had prompted the government to start rationing of diesel sales at retail pumps in June. The curbs were quickly lifted after the US-Iran truce helped ease global oil prices.
Large institutional customers such as defence, railways and manufacturing companies continue to buy through the regular channel. Smaller contractors, miners, road builders and other businesses, however, have shifted to retail pumps to contain fuel costs and protect margins. State road transport corporations continue to receive diesel at retail rates.
Bulk sales accounted for about 12% of India's diesel consumption prior to the war. A similar shift to retail pumps occurred in the early months of the conflict, which began on February 28, when pump prices remained unchanged while bulk rates rose with global prices. The sudden shift in demand caused panic buying and temporary shortages in some areas.
