Indian Oil Rating: Buy – Retail hikes allay concerns for company

In 2020, marketing was a weak spot for state-owned oil marketing companies (OMCs). With a sharp increase in taxation, retail fuel prices were close to the peak at an oil price of just $45-50/bbl. While OMCs did take price hikes, these were infrequent and lower than required. But, recently OMCs and the Government of India (GoI) have surprised us with price hikes.

For petrol/diesel, despite peak prices, OMCs raised prices for 12 consecutive days. So far in 2021, petrol/diesel prices are up ~Rs 7.2-7.5/L (9-10%, ~$16/bbl). Since

1 Jan 2020, while oil prices have stayed nearly flat, petrol/diesel prices are up Rs 13-16/L (20-21%, ~$29-34/bbl), and retail subsidised LPG prices are up ~44%.