It’s the state-run oil retailers, not consumers, who are gaining the most from the plunge in crude. At least for now.
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Marketing margin that oil companies earn on the sale of every litre of petrol and diesel is now at its all-time high as retail prices of auto fuels have not fallen as much as the crude has tumbled from its last peak.
Brent crude, the Asian benchmark for oil, dropped below $60 a barrel after Saudi Arabia’s energy minister signalled that the kingdom’s output may have reached a record. The U.S. decision to exempt big buyers of Iranian oil from sanctions also aided the 30 percent drop in the price of oil since Oct. 3.
But retail prices, which had jumped to a record as oil surged earlier this year, are not directly linked to crude. Indian refiners consider the 15-day average crude price and factor in the impact of currency movement and freight costs to calculate how much they spend to convert every barrel of crude into auto fuel.
Since the last peak on Oct. 15, the conversion cost has fallen nearly 18 percent for diesel and 27 percent for petrol, according to data compiled by BloombergQuint. Retail prices, however, declined 8 percent and 10 percent, respectively during the period.
A lag in lowering retail prices led to a multifold jump in the mark-up retailers earn on every litre of petrol and diesel.