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The smoldering geopolitical spark in West Asia has now started heating the global economy as well as the Indian stock market. Crude oil prices are rising at the speed of rocket in the international market and have crossed the level of $ 100 per barrel. As a common citizen, you might be thinking that the prices at petrol pumps in the country are stable, then what is there to worry about? In fact, beneath this apparent silence, there is a huge turmoil within the oil companies. This gap between expensive crude oil and stable retail prices is now preparing to deal a deep blow to the profits of Indian oil companies and the portfolios of investors.

Crude oil prices are on fire

Crude oil, which was trading around 65 to 70 dollars per barrel till some time ago, has today crossed 100 dollars due to war and tensions. Despite this, there has been no change in the retail prices of petrol and diesel in India. This is certainly a matter of relief for the general public, but for government oil marketing companies (OMCs) it has become a major economic crisis. They are buying expensive crude oil from the international market, but are forced to sell it at old and low prices in the domestic market. To compensate for this ever increasing loss, these companies are now considering taking a new and strict step.

What is the problem with RTP, due to which refineries are worried?

According to reports coming from the market, marketing companies are planning a strategy to make major changes in 'Refinery Transfer Price' (RTP) to reduce their losses. RTP is actually the internal price at which refineries hand over finished petrol and diesel to marketing companies for sale. If OMCs freeze this RTP or fix huge discounts on it, the refineries will face a big financial blow. This means that the refineries would no longer be able to benefit from the increased international crude oil prices. They will also be forced to bear some part of the losses of marketing companies on their shoulders.

The biggest threat is looming over the shares of these companies

The most devastating impact of this possible decision will be on those refinery companies which do not have their own retail network or petrol pump. These companies sell their finished fuel entirely to OMCs. Market experts clearly believe that companies like Mangalore Refinery and Petrochemicals Limited (MRPL), Chennai Petroleum Corporation Limited (CPCL) and HPCL-Mittal Energy Limited (HMEL) may have to suffer the most losses in this situation. Since they do not have the option to sell oil directly to customers, they are completely dependent on the policies and conditions of OMCs.

Investors' profits may be eclipsed

The stock market has started sensing this coming danger and its effect is clearly visible on the stock prices. If we talk about MRPL, its shares are currently trading around the level of Rs 178. In the last one week alone, this stock has registered a huge decline of more than 14 percent. However, in the long run this company has not disappointed investors and has given strong returns of 323 percent in the last five years.

On the other hand, the share of CPCL is trading around Rs 918 and it has also seen a decline of about 11 percent in the last one week. This is the same stock which has given a handsome profit of 714 percent to its investors in the last five years. According to market analysts, if this decision of discounting or freezing RTP is implemented, then in the coming times, there may be huge pressure on the profits (margins) of these companies giving excellent returns.

Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsh advises its readers and viewers to consult their financial advisors before taking any money-related decisions.