Oil prices rose due to the war in West Asia and Strait of Hormuz tensions. Profitability pressure has increased on India’s oil companies like IOC, BPCL and HPCL, while the government is considering keeping retail prices stable.
Oil Marketing: S&P Global Ratings on Wednesday warned that the profits of major oil marketing companies like Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) may come under pressure. The main reason for this is that to control inflation, the government and companies may choose to keep the retail prices of petrol and diesel stable.
Oil prices rise due to US-Iran tension
There was an increase in crude oil prices due to war situations in West Asia and tension between Iran and America. Earlier this week, Brent crude had gone above $100 per barrel. The main reason for this increase is the tense situation in the Strait of Hormuz. This route is important for the supply of about 20 percent of the world’s crude oil and liquefied natural gas (LNG). However, on Wednesday the prices of crude oil fell to around $ 88 per barrel.
S&P raised Brent crude estimates
S&P Global Ratings has increased the average price of Brent crude oil for the year 2026 by $ 5 to $ 65 per barrel. The rating agency said that India will fulfill its crude oil needs through the sea route. Apart from this, India has also adopted options to buy oil from countries like Russia and South America. At present, India is buying about 11 lakh barrels of oil per day from Russia and about 1.42 lakh barrels of oil per day from Venezuela.
Importance of Strait of Hormuz
India imports about 88 percent of its total crude oil requirement and the country is the third largest oil importer in the world. India uses about 5.8 million barrels of oil daily, of which about 2.5 to 2.7 million barrels comes through the Strait of Hormuz. Apart from this, about 55 percent of the country’s LPG consumption and about 30 percent of the LNG consumption also comes through this route.
limited reserves and risk
S&P has warned that despite such huge dependence, India has limited reserves. Strategic petroleum reserves are equivalent to about 10 days of the country’s consumption, while commercial reserves can meet the needs of about 65 days. The reserves of LPG and LNG are even less. The stock of LPG is considered sufficient for about 25-30 days and that of LNG for 10-12 days. In such a situation, disruption in global supply or rise in prices may increase pressure on India.
pressure on profits
According to S&P, there may be pressure on the profits of oil marketing companies due to government instructions and rising oil prices. Keeping the retail prices of petrol and diesel stable may reduce the margins of companies. At the same time, oil producing companies like ONGC can benefit from higher prices, as they will get more revenue from selling oil.
control lpg prices
LPG prices in India are controlled by the government. Despite rising oil prices, companies like IOC, BPCL and HPCL may have to keep prices stable to control inflation. In such a situation, there will be direct pressure on the profits of companies. The government can provide relief when needed through budgetary support or by cutting excise taxes, as was done during the Russia-Ukraine war.
India’s role in the global oil market
India is not only a big consumer but also plays an important role in the global supply chain. The country’s refineries process imported crude oil to make petrol, diesel and other petrochemical products and export it to Asia and Europe. In such a situation, India’s purchases become important for the stability of the global oil market.
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