Impact on oil and gas supply due to problems in the Strait of Hormuz
According to rating agency ICRA, if the current situation continues like this, the loss (under-recovery) of oil companies on LPG may reach around Rs 80,000 crore in FY2027. The main reason for this is the ongoing tension in West Asia and problems in supply, due to which prices remain continuously high.
Why is the pressure on oil companies increasing?
ICRA senior officer Prashant Vashishtha said that despite the increase in crude oil prices, the prices of petrol and diesel have not been increased much. This is affecting the earnings of oil marketing companies (OMCs). If the price of crude oil remains at $120125 per barrel, there could be a loss of about ₹14 per liter on petrol and up to ₹18 per liter on diesel.
LPG is expensive, but companies are not getting full money
Due to the impact of LPG supply from West Asia, its international prices have increased. India has tried to increase supplies from America and Australia, but companies are still incurring losses on domestic LPG.
Impact of Strait of Hormuz
Due to problems in the Strait of Hormuz, the supply of oil and gas has been affected. Its impact is not only on oil companies but also on many sectors like fertilizer, chemical and city gas.
Pressure increased in fertilizer sector also
Raw materials like ammonia and sulfur have become expensive, due to which the cost of making fertilizer has increased. The price of gas for urea has also increased from $13 to about $19 per mmbtu. ICRA estimates that fertilizer subsidy may reach Rs 2.05 to 2.25 lakh crore in FY2027, which is more than the budget.
Impact on other sectors
- Prices of chemicals and polymers are increasing
- Helium has become expensive, which is used in fiber optics and drones.
- Margins are under pressure in CNG segment
- However, the situation is expected to be slightly better in the piped gas (PNG) segment.
What signals overall?
Due to high energy costs and raw material prices, there will be pressure on the earnings of many sectors. The refining sector may remain fine, but the times ahead look challenging for the fuel retailing, fertilizer and chemical sectors.
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