Indian oil marketing companies are facing losses of up to Rs 30 on every litre of fuel sold, according to a Jefferies report cited by the Times of India, as the Middle East conflict pushes up crude procurement and shipping costs. The estimate exposes a vulnerability that extends beyond the balance sheets of petrol and diesel retailers: India’s urban transport systems, freight networks and household economies remain closely tied to an international supply chain whose costs can change rapidly when regional shipping is disrupted.
Jefferies estimated that Indian OMCs are losing Rs 26 per litre on petrol and Rs 30 per litre on diesel. The calculations were based on 15-day average prices and compared the cost of procuring crude with what the companies recover through domestic fuel sales. The report said the procurement cost was comparable to an Indian crude basket price of $125 per barrel, creating a substantial gap between input costs and fuel-marketing realisations.
The distinction between refining profitability and fuel-retailing profitability is central to understanding the pressure. Jefferies said refining margins remain elevated, but that benefit is being offset by losses on the marketing side. In other words, the ability to process crude profitably does not necessarily protect an OMC when the cost of obtaining and transporting that crude rises faster than the price recovered through domestic fuel sales.
This is significant because fuel is not an isolated commodity in Indian cities. Petrol and diesel support daily commuting, bus and taxi operations, goods movement, construction activity and the delivery of essential supplies. A sustained increase in the underlying cost of bringing crude into the country can therefore affect the wider operating environment for urban infrastructure and services, even when the immediate financial impact is recorded by oil companies.
The Jefferies assessment points to freight as a major source of the current squeeze. Shipping costs have risen eightfold since the conflict began, according to the report. Freight now accounts for more than a quarter of the landed cost of crude, compared with about 3 per cent before the war. Jefferies also said freight rates increased by another 8 per cent over the previous week, adding further pressure to the cost of importing oil into India.
That change alters the structure of the supply problem. Crude prices are usually the most visible indicator of fuel-market stress, but the report shows that transport costs can become equally important when shipping routes are exposed to conflict. The landed cost of crude includes not only the price of the commodity but also the expense of moving it from producing regions to Indian refineries. When freight becomes a much larger share of that cost, disruption in maritime routes can affect fuel economics even without a comparable rise in the headline crude price.
The report also describes a deterioration in flows from the Middle East. Excluding Iran, oil shipments from the region have fallen to around 75 per cent of pre-war levels, compared with approximately 95 per cent at the end of September. Jefferies attributed the renewed decline to heightened attacks in the Gulf of Oman. The figures suggest that an earlier recovery in regional shipments had reversed, leaving importing countries exposed to renewed supply and transport pressure.
For India, the importance of these changes lies in the country’s exposure to imported energy and in the scale of fuel use across its expanding urban system. The supplied report does not provide a breakdown of India’s crude-import dependence, nor does it establish how long the present disruption will last. It does, however, show how quickly the economics of fuel marketing can deteriorate when two costs rise together: the price of procuring crude and the cost of transporting it.
The OMC losses also demonstrate the difference between a market shock and a simple retail-price movement. Consumers generally encounter fuel through the price displayed at a petrol station. The financial stress identified by Jefferies occurs earlier in the chain, between international procurement, shipping, refining and domestic sale. If domestic fuel prices do not adjust in line with landed costs, the immediate gap is absorbed by the fuel retailers. The report does not state what pricing decisions Indian OMCs or the government will take in response, so the eventual distribution of the pressure remains unestablished in the supplied material.
The institutional position of OMCs makes this issue particularly important for cities. These companies connect international crude markets to the domestic transport economy through procurement, shipping, refining and retail distribution. Their marketing margins therefore function as a transmission point between geopolitical disruption and everyday urban activity. A rise in freight costs can begin as a maritime supply-chain problem and emerge domestically as pressure on the economics of vehicle use, goods delivery and public-service operations.
The report’s figures also underline the challenge of managing energy security through infrastructure alone. India may have refining capacity and an established fuel-distribution network, but those assets cannot eliminate exposure to the cost and reliability of imported crude movement. Refineries can continue operating while the marketing side comes under strain. This means resilience depends not only on physical capacity but also on the ability of the wider system to withstand volatile shipping costs and interrupted regional flows.
The present episode further shows why supply-chain geography matters to urban planning and infrastructure decisions. Roads, metro systems, logistics networks and construction projects are often assessed through their direct capital and operating costs. Fuel-market disruption introduces a wider variable: the cost of moving people, equipment and materials through the city. The supplied report does not quantify the effect on fares, freight rates, construction budgets or municipal expenditure, so those consequences cannot be established from the current evidence. But the OMC estimates clarify the upstream pressure that would precede them.
There is also a timing problem. Jefferies’ calculations use 15-day average prices, while the report describes freight rates rising further over the previous week. This indicates that the estimated losses reflect a moving market rather than a settled cost position. If shipping costs continue to change, the gap between procurement costs and domestic fuel realisations could widen or narrow. The report does not provide a forward estimate, and no prediction about the duration or scale of the losses can be made from the supplied information.
The contrast between elevated refining margins and negative marketing margins is one of the clearest signals in the assessment. It suggests that performance across the petroleum chain cannot be judged through a single indicator. Refining may benefit from one set of market conditions, while retail distribution is damaged by another. For policymakers and consumers, this distinction matters because aggregate company performance may not reveal where the pressure is occurring or how it is being managed.
The central urban question is therefore not only whether international crude supplies are disrupted. It is how much volatility India’s cities and transport-dependent economy can absorb when the cost of importing energy rises abruptly. Petrol and diesel are embedded in the operation of private vehicles, buses, commercial fleets, delivery networks and construction machinery. The report does not show the final impact on any of these users, but it identifies the upstream financial shock that places them at risk of higher operating costs if it persists.
The evidence currently confirms three linked developments: Indian OMCs are estimated to be losing up to Rs 30 per litre on fuel sales; freight has become a far larger component of crude’s landed cost; and oil flows from the Middle East, excluding Iran, have fallen to around 75 per cent of pre-war levels. What remains unclear is how long the disruption will continue, whether domestic fuel prices will change, and how the losses will affect urban transport and logistics. Those are the developments that will determine whether the present pressure remains a company-level margin problem or becomes a wider urban cost shock.
