Fuel Price Hike: Why a 20% Petrol and Diesel Price Increase Is Important for OMC Stocks

Synopsis: Surging crude oil prices and rupee weakness are increasing pressure on oil marketing companies, raising expectations of further fuel price hikes and putting select OMC stocks back into investors’ focus.

India’s oil marketing sector has once again come under the spotlight as rising global crude oil prices and currency depreciation sharply increase fuel procurement costs for state-run oil retailers.

Companies such as Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited are currently facing mounting under-recoveries because retail fuel prices have remained largely controlled despite the surge in global energy markets. With geopolitical tensions keeping crude elevated, expectations of additional petrol and diesel price hikes are now strengthening across the sector.

Current Crude Oil Price and Fuel Price Impact

India’s crude oil basket has reportedly surged to nearly $114 per barrel from around $71 per barrel in July 2025, marking a rise of over 60 percent. At the same time, rupee depreciation has further increased the landed cost of crude imports by more than 74 percent in rupee terms.

Although petrol and diesel prices were recently increased by Rs 3 per litre, analysts suggest that the hike remains insufficient to offset the massive losses being absorbed by oil marketing companies. Current estimates indicate under-recoveries of nearly Rs 15.6 per litre on petrol and over Rs 22 per litre on diesel.

Higher fuel prices directly impact transportation, logistics, aviation, manufacturing and household expenses, eventually pushing inflation higher. Rising petrol and diesel costs also increase freight expenses, which can translate into higher prices for groceries, consumer goods and essential commodities. 

Why Fuel Prices May Need to Increase Further

The primary reason behind the expected fuel price hike is the widening gap between global crude oil costs and domestic retail fuel prices. Since fuel prices in India have remained largely unchanged for several years despite rising crude prices, oil marketing companies have been absorbing substantial losses to shield consumers from inflationary shocks.

According to the Moneycontrol analysis, fuel prices may need to rise by roughly another 20 percent for OMCs to return to last year’s profitability levels. If crude oil climbs toward $125 per barrel, losses on petrol and diesel sales could widen significantly further.

India imports more than 85 percent of its crude oil requirements, making the economy highly sensitive to global oil price movements and geopolitical disruptions. The ongoing tensions in West Asia and concerns around supply routes such as the Strait of Hormuz have intensified fears of prolonged elevated crude prices

HPCL: 

Hindustan Petroleum Corporation Limited is one of India’s leading state-owned oil marketing companies engaged in refining, fuel retailing, pipelines, lubricants, aviation fuel and LPG distribution. The company operates major refineries in Mumbai and Visakhapatnam with a combined refining capacity exceeding 24 million metric tonnes annually and has a vast nationwide fuel retail network.

With the market capitalization of Rs. 78,091 Crores, the shares of HPCL were trading at around Rs. 367 per share which is 27 percent discount from its 52-week high of Rs. 508 per share and is trading at a P/E of 4.29 whereas industry P/E stands at 14.5

BPCL: 

Bharat Petroleum Corporation Limited is a leading state-owned oil marketing company engaged in crude oil refining, fuel marketing, LPG distribution, aviation fuel supply and petrochemicals. The company operates major refineries in Mumbai, Kochi and Bina with strong nationwide fuel retail infrastructure, serving millions of customers across India through its extensive network of petrol pumps and energy businesses. 

With the market capitalization of Rs. 1,23,300 Crores, the shares of BPCL were trading at around Rs. 284 per share which is 27 percent discount from its 52-week high of Rs. 392 per share and is trading at a P/E of 4.94 whereas industry P/E stands at 14.5 

IOCL:

Indian Oil Corporation Limited is India’s largest state-owned oil marketing company engaged in refining, fuel retailing, pipelines, petrochemicals, natural gas and renewable energy businesses. The company operates multiple refineries across India with one of the country’s largest fuel distribution networks, serving millions of customers through petrol pumps, LPG services and aviation fuel operations nationwide.

With the market capitalization of Rs. 1,89,507 Crores, the shares of IOCL were trading at around Rs. 134 per share which is 29 percent discount from its 52 weeks high of Rs. 189 per share and is trading at a P/E of 5.31 whereas industry P/E stands at 14.5 

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Fuel Price Hike: Why a 20% Petrol and Diesel Price Increase Is Important for OMC Stocks appeared first on Trade Brains.