Petrol, diesel prices to drop Rs 2-3 per litre if crude prices hold steady

New Delhi: A recent report from ICRA on Thursday suggests that petrol and diesel prices in India could decrease by Rs 2-3 per litre if crude oil prices remain stable. The marketing margins for oil companies have improved recently due to lower crude prices, creating an opportunity for price reductions.

"ICRA estimates that the OMCs' net realisation was higher by Rs 15/litre for petrol and Rs 12/litre for diesel compared to international product prices in September 2024 (till September 17)," said Girishkumar Kadam, SVP and Group Head - Corporate Ratings, ICRA.

ICRA's assessment indicates that the current retail prices of petrol and diesel have not changed since March 2024, except for a minor cut of Rs 2 per litre on March 15. If crude prices hold steady, there may be room for further price cuts.

Crude oil prices have fallen sharply in recent months, largely due to slow global economic growth and high production levels from the US. Additionally, the OPEC+ group has delayed its production cuts to address the declining prices. Weak demand from China, driven by increased electric vehicle sales and a downturn in the real estate sector, has further influenced prices. European demand has also weakened due to slow industrial activity and a shift toward electric vehicles.

ICRA's report mentions that a marketing gain of Rs 1 per litre on petrol and diesel could offset a loss of USD 0.90 per barrel in gross refining margins for local refineries. In India, consumption of petroleum products grew by 5 percent in FY24 and is expected to rise by 3-4 percent in FY25, driven by economic growth and increased travel.

To meet this rising demand, oil companies plan significant investments in refining. Domestic refining capacity is projected to increase from 256.8 million tonnes in March 2024 to 306 million tonnes over the next few years, supporting both local consumption and exports.

Agency