- The short — why Brent × INR matters more than headlines
- From Brent to the nozzle: pricing chain
- Sensitivity tables: pump price & OMC margin
- Pass-through & tax: excise/VAT pivots
- Household planner: monthly fuel bill scenarios
- Investor & policy playbooks
- FAQ & method
The short
- Double hit, double help: Crude and currency usually move together; a weak INR can erase gains from softer Brent.
- Margins live in the middle: OMC marketing margins swing with Brent/INR, inventory lags, and retail pass-through cadence.
- Taxes cushion or amplify: Excise/VAT tweaks change how much of a shock reaches consumers.
From Brent to the nozzle — the chain
Flow
- Brent → product cracks → landed cost (USD) → convert @ USD/INR
- + freight, insurance, refinery transfer price → depot
- + OMC marketing margin + dealer commission + taxes → pump
Key moving parts
- Product cracks (gasoline/diesel) can diverge from Brent
- Inventory lag (FIFO) creates near-term over/under-recoveries
- Retail price revisions are periodic, not tick-by-tick
Sensitivity — pump price & OMC margin (illustrative)
Assumptions: diesel/petrol blend, average tax structure, inventory lag one week, dealer commission stable. Margins shown per litre.
| USD/INR → Brent ↓ | ₹82 | ₹84 | ₹86 | |||
|---|---|---|---|---|---|---|
| Pump ₹/L | OMC margin ₹/L | Pump ₹/L | OMC margin ₹/L | Pump ₹/L | OMC margin ₹/L | |
| $70 | 92–94 | 2.5–3.0 | 94–96 | 1.8–2.3 | 96–98 | 1.0–1.5 |
| $80 | 98–100 | 1.8–2.3 | 100–102 | 1.0–1.5 | 102–104 | 0.3–0.8 |
| $90 | 104–106 | 1.0–1.5 | 106–108 | 0.2–0.7 | 108–110 | -0.3–0.2 |
| $100 | 110–112 | 0.2–0.7 | 112–114 | -0.3–0.2 | 114–116 | -0.8–-0.3 |
Read it Negative margin ranges imply under-recovery if retail prices aren’t revised or taxes aren’t adjusted.
Pass-through & tax pivots
Levers
- Central excise/VAT: cuts raise OMC margin and/or lower pump prices
- Revision cadence: quicker pass-through reduces prolonged under-recovery
- Dealer commission: small but sticky; rarely flexed
What to watch
- Crack spreads vs Brent (gasoline vs diesel)
- Forex volatility windows (policy events, oil supply shocks)
- Festival/harvest demand where revisions may pause
Household planner — monthly fuel bill
Assume 60 litres/month usage.
| Pump ₹/L | Monthly bill (₹) | Change vs ₹100/L |
|---|---|---|
| 95 | 5,700 | -300 |
| 100 | 6,000 | — |
| 105 | 6,300 | +300 |
| 110 | 6,600 | +600 |
Tip For two-car households, scale roughly linearly with litres, but factor EV/hybrid usage to reduce exposure.
Playbooks
Consumers
- Track Brent × INR, not just one line; plan long drives when margin headroom is high.
- Use fuel-price alert apps; consolidate refuelling around revisions.
Investors
- Model marketing margin bands and inventory lags; don’t extrapolate GRMs into retail.
- Watch tax chatter; excise/VAT pivots can flip EPS deltas quickly.
Policy
- Prefer small, frequent pass-throughs to avoid arrears.
- Targeted excise relief beats broad freezes during spike windows.
FAQ & method
- Why do margins differ across cities? VAT and freight zones vary by state/region.
- Are product cracks constant? No; diesel/gasoline cracks swing with seasonality and global balances.