- The short: why Brent × USD/INR matters more than either alone
- How OMC marketing margins actually work
- Scenario matrix: landed cost bands (₹/L)
- City price build-up: where taxes fit (structure)
- What it means for households (monthly impact)
- Watchlist & FAQ
The short
- Two levers: Landed product cost rises when Brent ↑ and/or USD/INR ↑. Both together squeeze OMC marketing margins; the reverse widens them.
- Rule of thumb (illustrative): Every +$1 Brent changes margin by roughly −₹0.52/L (at ~USD/INR 83–87). Every +₹1 on USD/INR changes margin by roughly −₹0.50–0.55/L (at Brent ~70–85).
- Pump prices: Retail = pre-tax base + Central excise + State VAT + dealer commission. Pass-through to retail is often lumpy (policy & timing).
How margins work (simple model)
Gross marketing margin (₹/L) ≈ Pre-tax retail (₹/L) − Landed product cost (₹/L).
- Pre-tax retail = Your city’s pump price minus taxes and dealer commission.
- Landed product cost ≈ ((Brent + product crack) × USD/INR ÷ 159) + freight/other. (1 barrel = 159 L.)
- Reality check Actual pricing is based on refined product benchmarks (gasoline/diesel “cracks”), not Brent alone, and varies by city/state tax structure.
Scenario matrix — landed cost bands (₹/L)
Illustrative landed product costs using a notional crack of $10/bbl and freight/other of ₹1/L. Use this to gauge direction; plug your own crack/FX for precision.
| Brent (USD/bbl) | USD/INR 83 | USD/INR 85 | USD/INR 87 |
|---|---|---|---|
| 65 | ₹40.15 | ₹41.09 | ₹42.04 |
| 70 | ₹42.76 | ₹43.77 | ₹44.77 |
| 75 | ₹45.37 | ₹46.44 | ₹47.51 |
| 80 | ₹47.98 | ₹49.11 | ₹50.25 |
| 85 | ₹50.59 | ₹51.79 | ₹52.98 |
How to use If your city’s pre-tax base is, say, ₹48/L, compare with the landed cost to eyeball margin headroom: Margin ≈ 48 − landed.
City price build-up (structure)
Components
- Pre-tax base: Reflects product benchmarks, FX, freight.
- Central excise: Fixed per-litre levy (policy-determined).
- State VAT: Often ad-valorem; varies by state and may move with price.
- Dealer commission: Per-litre component.
What shifts in a squeeze?
- OMC margin compresses first if retail prices are held.
- Persistent squeeze → partial retail price adjustment (timing varies).
- Refining gains/losses offset marketing only partially (product mix dependent).
What it means for households
| Use case | Monthly litres | ₹1/L move | ₹2/L move | ₹5/L move |
|---|---|---|---|---|
| City commuter (2-wheeler) | 20 L | ₹20/month | ₹40/month | ₹100/month |
| Petrol hatchback | 45 L | ₹45/month | ₹90/month | ₹225/month |
| Diesel SUV | 70 L | ₹70/month | ₹140/month | ₹350/month |
| Intra-city delivery van | 120 L | ₹120/month | ₹240/month | ₹600/month |
Tip If you’re price-sensitive, small behaviour shifts (route planning, tyre pressure, idling) offset ₹1–2/L moves easily over a month.
OMC watchlist
- Product cracks Diesel & gasoline cracks vs. Brent drive actual realizations.
- FX path A weaker INR amplifies any Brent move; stability eases margins.
- Inventory gains/losses Sharp moves create mark-to-market noise.
- Policy cadence Price adjustments can be batched; watch festival windows and budget season.
FAQ
- Why not just Brent? Pumps sell refined products; refiners realize product cracks over Brent. We use Brent for simplicity and call out cracks separately.
- Do all states tax the same? No. VAT and local levies vary by state and can be ad-valorem; that’s why city prices differ.
- Are these numbers exact? No—tables are illustrative. Use them directionally; wire your live PPAC/product benchmarks for precision.