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Time of India
7 days ago
- Business
- Time of India
How will the surge in crude oil prices affect various sectors?
The latest surge in global prices of crude oil, unless short-lived, may potentially affect profitability of companies in the select sectors that either process it to produce finished products or consume intermediates derived from it. Companies in the sectors including crude oil refining, paints, aviation, automobiles, petrochemicals and fertilisers are expected to be affected by the rapid increase in crude prices whereas those in the business of oil production or upstream companies and companies in the electric vehicles (EV) segment may benefit depending upon the government's policies. Brent crude futures jumped 7per cent to settle at $74.23 per barrel on Friday, after briefly soaring over 13per cent to touch an intraday high of $78.50, as fears of supply disruption due to escalating tension between Israel and Iran rattled energy markets. Since India imports over 85per cent of the crude oil requirement, a sustained rise in oil prices may result in broader inflationary pressures. However, the exact impact hinges on how long prices remain elevated. "It is too early to fully gauge the impact. A prolonged spike could put significant pressure on corporate margins," said Narendra Solanki, fundamental research head, Anand Rathi Shares and Stock Brokers. He added that if prices retreat soon, the effect on companies will be minimal. "We lift our three-month price target to $72.5, while our view and long term targets remain unchanged at Neutral and $60," said Norbert Rucker, head economics, Julius Baer, in an email quote citing that structural setting of the oil market should remain unscathed. Oil Marketing Companies (OMCs): Margin pressure looms Companies such as Indian Oil Corp , BPCL , and HPCL may face shrinking margins. While higher crude oil prices raise refining costs, OMCs may not be able to fully pass on the impact to end users, leading to potential under-recoveries and profit erosion. Oil & Gas Producers: Beneficiaries of the surge Upstream companies such as ONGC and Oil India sell domestically produced crude at prices linked to global benchmarks. While sustained rally in oil prices potentially improve their realisations, the effect on their revenues, and profit margins will depend upon the government's stance. For instance, it levied a windfall tax on profits of oil producers between July 2022 and December 2024 when crude prices rose due to the Russia-Ukraine conflict. Aviation: Soaring fuel bills Aviation turbine fuel (ATF) or jet fuel, derived from crude, forms over one-third of an airline's operating cost. A rise in crude prices inflates fuel expenses, putting pressure on the bottom lines of carriers. Airlines may respond by increasing fare, but at the risk of dampening demand in a price-sensitive market. Paints: Costs could dull profitability Paint manufacturers like Asian Paints , Berger Paints , and Kansai Nerolac depend on crude derivatives such as solvents and resins, which form nearly 50per cent of total costs. Rising crude prices could force companies to increase retail prices, potentially hurting demand and market growth. Chemicals & Petrochemicals: Feedstock woes Naphtha, ethane, propane, and other crude derivatives are essential feedstocks for producing plastics, synthetic fibres, solvents, and a vast array of chemicals. Raw material cost is nearly half of the total revenues for chemical and petrochemical firms. Companies like Pidilite , SRF , Aarti Industries , and Deepak Nitrite will face a surge in raw material costs if crude prices stay elevated for a longer period. Fertiliser companies: Energy cost overhang The production of nitrogen-based fertilisers, particularly urea and ammonia, depends on natural gas and oil as feedstock. Rising crude often pulls up LNG (liquefied natural gas) prices, making fertiliser production more expensive. This could lead to higher retail prices and a larger subsidy burden for the government. Automobiles: Input costs up, electric vehicles get a boost Automobile manufacturers may witness a rise in costs due to more expensive plastics, rubber, and composites-all derived from petroleum. While this could put pressure on the profit margins of traditional automakers, the surge in fuel prices could enhance the appeal of electric vehicles (EVs), giving the manufacturers of electrics a relative advantage.
Time of India
16-06-2025
- Business
- Time of India
How will the surge in crude oil prices affect various sectors?
ET Intelligence Group: The latest surge in global prices of crude oil, unless short-lived, may potentially affect profitability of companies in the select sectors that either process it to produce finished products or consume intermediates derived from it. Companies in the sectors including crude oil refining, paints, aviation, automobiles, petrochemicals and fertilisers are expected to be affected by the rapid increase in crude prices whereas those in the business of oil production or upstream companies and companies in the electric vehicles (EV) segment may benefit depending upon the government's policies. Brent crude futures jumped 7% to settle at $74.23 per barrel on Friday, after briefly soaring over 13% to touch an intraday high of $78.50, as fears of supply disruption due to escalating tension between Israel and Iran rattled energy markets. Since India imports over 85% of the crude oil requirement, a sustained rise in oil prices may result in broader inflationary pressures. However, the exact impact hinges on how long prices remain elevated. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Affordable Apartments for Rent in Azemmour Apartments for rent | Search Ads Learn More Undo "It is too early to fully gauge the impact. A prolonged spike could put significant pressure on corporate margins," said Narendra Solanki, fundamental research head, Anand Rathi Shares and Stock Brokers. He added that if prices retreat soon, the effect on companies will be minimal. "We lift our three-month price target to $72.5, while our view and long term targets remain unchanged at Neutral and $60," said Norbert Rucker, head economics, Julius Baer, in an email quote citing that structural setting of the oil market should remain unscathed. Oil Marketing Companies (OMCs): Margin pressure looms Live Events Companies such as Indian Oil Corp , BPCL , and HPCL may face shrinking margins. While higher crude oil prices raise refining costs, OMCs may not be able to fully pass on the impact to end users, leading to potential under-recoveries and profit erosion. Oil & Gas Producers: Beneficiaries of the surge Upstream companies such as ONGC and Oil India sell domestically produced crude at prices linked to global benchmarks. While sustained rally in oil prices potentially improve their realisations, the effect on their revenues, and profit margins will depend upon the government's stance. For instance, it levied a windfall tax on profits of oil producers between July 2022 and December 2024 when crude prices rose due to the Russia-Ukraine conflict. Aviation: Soaring fuel bills Aviation turbine fuel (ATF) or jet fuel, derived from crude, forms over one-third of an airline's operating cost. A rise in crude prices inflates fuel expenses, putting pressure on the bottom lines of carriers. Airlines may respond by increasing fare, but at the risk of dampening demand in a price-sensitive market. Paints: Costs could dull profitability Paint manufacturers like Asian Paints , Berger Paints , and Kansai Nerolac depend on crude derivatives such as solvents and resins, which form nearly 50% of total costs. Rising crude prices could force companies to increase retail prices, potentially hurting demand and market growth. Chemicals & Petrochemicals: Feedstock woes Naphtha, ethane, propane, and other crude derivatives are essential feedstocks for producing plastics, synthetic fibres, solvents, and a vast array of chemicals. Raw material cost is nearly half of the total revenues for chemical and petrochemical firms. Companies like Pidilite , SRF , Aarti Industries , and Deepak Nitrite will face a surge in raw material costs if crude prices stay elevated for a longer period. Fertiliser companies: Energy cost overhang The production of nitrogen-based fertilisers, particularly urea and ammonia, depends on natural gas and oil as feedstock. Rising crude often pulls up LNG (liquefied natural gas) prices, making fertiliser production more expensive. This could lead to higher retail prices and a larger subsidy burden for the government. Automobiles: Input costs up, electric vehicles get a boost Automobile manufacturers may witness a rise in costs due to more expensive plastics, rubber, and composites-all derived from petroleum. While this could put pressure on the profit margins of traditional automakers, the surge in fuel prices could enhance the appeal of electric vehicles (EVs), giving the manufacturers of electrics a relative advantage.
India Today
13-06-2025
- Business
- India Today
Iran-Israel tensions rise. Why India should worry
Tensions between Iran and Israel are rising again, and this time, the situation could affect not just West Asia, but countries like India as well. At the centre of global concern is the Strait of Hormuz, a narrow but vital waterway through which about one-third of the world's seaborne oil OF HORMUZ: A GLOBAL CHOKEPOINTThis maritime passage, located between the Persian Gulf and the Gulf of Oman, plays a vital role in global energy supply. If trouble breaks out here, oil prices could shoot up, and supply chains could get blocked, affecting energy-dependent economies worldwide, including to Norbert Rucker, Head of Economics and Next Generation Research, Julius Baer, "Geopolitics is back. Israel's military strikes against Iran raise fears about a broader escalation in the region. Oil is the forever measure of such conflicts, and prices spiked accordingly. The situation remains in flux, and the coming days and weeks will show how far the escalation goes."INDIA'S ENERGY VULNERABILITY India is particularly exposed to this threat. Over two-thirds of its oil imports and nearly half of its liquefied natural gas (LNG) imports transit through the Strait of there be any closure or disruption, India may be forced to seek alternative sources and routes, which usually involve higher costs and logistical potential for increased costs and supply chain disruptions underscores the need for India to explore diversified energy sources and enhance strategic reserves to mitigate such PRICES AND INFLATION RISKSadvertisementJPMorgan warns that oil prices could surge to $120 per barrel if the conflict escalates, fuelling inflation and widening India's current account crude prices would increase operational costs for shipping firms due to longer and more expensive re-routing of vessels, pushing up freight charges and delivery times."Oil supply concerns, of course, are boiling up and the risk of a closure of the Strait of Hormuz, a key choke point of oil trade, moves into focus," mentioned Norbert ON HOUSEHOLDS AND INDUSTRYA spike in oil prices would have a cascading effect on Indian households and businesses. Rising fuel costs could squeeze consumer budgets, raise the cost of living, and hurt industries dependent on oil as a raw material may face increased production costs, affecting their geopolitical tension also means increased insurance premiums for shipping vessels navigating conflict-prone waters, adding further pressure on global trade fact, the broader implications of the conflict highlight the interconnectedness of global trade and the critical role that regional peace plays in sustaining economic growth and security. Furthermore, maintaining stability in West Asia is essential for securing uninterrupted energy supplies, which are vital for India's economic Watch
