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PSU oil firms to ask Naik for price hike

Hemangi Balse

The state-owned oil companies are planning to meet petroleum minister Ram Naik on April 30 for an increase in the prices of petroleum products.

The companies will suggest "a price band" within which petroleum prices can vary. With volatile international crude prices, oil companies' marketing margins are getting significantly squeezed.

Crude prices have shot up from $18 per barrel in March 2002 to over $26 per barrel after the recent turmoil in West Asia. However, domestic retail oil companies have based their calculations on the assumption that the crude price will be $20 per barrel.

Naik had earlier ruled out any price hike till June 30. The oil companies also intend to suggest a marketing margin band.

"At present, we are orienting ourselves to a free market situation. There is a change in conception. We are moving out of the assured 12 per cent return on assets to a very volatile market where there are no fixed marketing margins. The situation is very fluid and we are taking a relook at our margins," a senior official at a state-run oil company said.

The retail oil companies are working out a formula which gives them a comfortable margin.

But the oil companies say the government's decision will depend on the market conditions.

"In a buoyant market, the oil companies can pass on any price differential. However, considering the recessionary market situation, the oil companies may have to bear a squeeze on their marketing margins," sources added.

Though the government decontrolled the petroleum sector on April 1, it did not allow the state-owned oil companies to increase the prices of petroleum products in tandem with global prices.

Oil prices retreated sharply on Wednesday after lingering fears over diminishing spare US fuel supplies were relieved by data showing stocks were surprisingly resilient to recent export disruptions in Venezuela.

After the market close on Tuesday, the latest industry data from the American Petroleum Institute booked a fall of slightly less than one million barrels in US crude tanks last week, about one quarter of the decline expected by the market.

Brokers said the data could signal the end of the latest rally, which saw prices climb for six out of the last seven trading sessions.

"The markets have had a lot of bullish news thrown at them in the last week or so and appears to be running out of steam on the upside," Simon Games-Thomas of Sydney-based NM Rothschild & Sons said in a research note.

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