In a surprising move, Shell India has raised diesel prices by as much as ₹20 per litre in less than a week’s time, while public sector fuel retailers continue to keep rates frozen for a record 18th month.
Daily Incremental Price Hike
Shell India, the India unit of the world’s second-largest oil and gas company, began incrementally raising fuel prices by ₹4 per litre every day. This has resulted in Shell India selling diesel at ₹130 per litre in Mumbai and ₹129 in Chennai, while petrol costs ₹117-118 a litre at Shell pumps.
Comparatively, public sector company petrol pumps in Mumbai sell petrol at ₹106.31 a litre and ₹102.63 in Chennai. Diesel at public sector pumps costs ₹94.27 a litre in Mumbai and ₹94.24 in Chennai.
Regional Disparities in Fuel Prices
In Bengaluru, Shell is selling diesel for ₹122 per litre, significantly higher than the ₹87.92 rate at public sector-owned petrol pumps and ₹87.99 at Reliance-BP bunks.
Dealers anticipate a ₹4 per litre hike in diesel prices at Shell pumps continuing through October. This means that diesel prices in Mumbai will reach ₹134 per litre.
Shell’s Unique Position
Shell India does not own an oil refinery in India, relying on sourcing products and market prices. The company has adjusted rates to reflect the surge in international oil prices since August.
In response to the price increase, a Shell India spokesperson stated, “Shell India confirms the price increase in diesel. We understand our customers’ concerns; however, we have decided to increase the diesel prices due to the volatile market conditions.” The spokesperson also mentioned that pricing depends on various factors, including government taxes, distribution costs, and operational expenses, with a commitment to providing high-quality fuels to enhance engine performance and efficiency
Public Sector Dominance
State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd. (HPCL) collectively own the majority of petrol pumps in the country. Russia’s Rosneft-backed Nayara Energy and Reliance-BP are the largest private fuel retailers, with Shell having a smaller presence with 346 pumps.
International Oil Price Fluctuations
International oil prices have been volatile in recent years, impacting the profitability of oil companies. Crude oil prices averaged close to $75 a barrel in May and June but rose to $80.37 in July and $86.43 in August. In September, the average was $93.54 per barrel, with this month’s average at $92.72.
According to brokerage Nomura, state-owned fuel retailers have incurred losses of ₹7 per litre at the current retail prices.
Challenges in Fuel Pricing
The freeze in fuel prices by public sector firms began in late 2021 due to all-time high rates and was further impacted by the war-led spike in international oil prices. Despite subsequent rounds of excise duty cuts, the price freeze continues, leading to net earnings losses for these companies.
Winding it up
Shell India’s significant diesel price hike stands in contrast to the record 18-month freeze by public sector fuel retailers. The move is a reflection of the challenges faced by oil companies in a volatile global market, impacting both private and public sector players in India.