India’s state-controlled refiners and retailers are requesting advance payments for the fuel they are supplying to fuel stations as the Middle East war chokes supply to the world’s third-largest crude importer and sent crude prices soaring.
Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL) – the state-owned refiners and retailers to which 90% of the more than 100,000 fuel stations in India are linked – want payments first before delivering the fuels, dealers told Reuters on Tuesday.
These three refiners have suspended fuel on credit to limit offtake by retail outlets, four people with knowledge of the matter told Hindustan Times today.
Indian Oil suspended its five-day revolving credit policy on Monday, but HPCL and BPCL started insisting on advance payments as early as last week, according to Hindustan Times’ sources.
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India has left domestic fuel prices unchanged despite the surge in international crude oil prices to above $100 per barrel due to the war in the Middle East.
India relies on the Middle East for about 40% of its crude supply and has been one of the first countries to feel the crunch. Add to this the huge population and the agriculture sector needing diesel, the fuel situation could further worsen if the Middle East war and the Strait of Hormuz crisis continue for weeks.
Apart from transport fuels, India depends on the Middle East for a large part of its liquefied petroleum gas (LPG) supply, or cooking gas. Most of India’s LPG imports – 60% of demand – need to past through the Strait of Hormuz.
As a result of choked supply, LPG demand this month has already slumped by 17%, per preliminary industry data cited by the Economic Times.
The Indian government has cut LPG supplies to commercial establishments and industries to have more cooking gas available for household use.
By Tsvetana Paraskova for Oilprice.com