Oil Company Signal To Reduce Supply

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Rationing of petrol and diesel may not be here yet but get ready for &quot;restriction&quot;. Indian Oil Corporation chairman Sarthak Behuria has said, &quot;We will have to restrict the sales to a reasonable level.&quot; He did not make it clear what he meant by &quot;reasonable level&quot; &mdash; he did not quantify the cut &mdash; but left no doubt it would be diesel that would face reduction in supply to dealers first. It's not clear yet what the restriction would amount to when you go to the gas station for replenishment but dealers may push you to buy the more expensive branded product rather than the regular diesel or petrol. Ajay Bansal, the general secretary of the Federation of All-India Petroleum Traders, said oil companies had already cut diesel supply by about 50 per cent to get consumers to buy branded products like Xtramile that cost Rs 3 more than ordinary diesel. A petroleum dealer in Calcutta said they had been instructed to push not only branded diesel but also petrol. In Mumbai, some dealers are already refusing to sell unbranded petrol. Restriction, in the words of Behuria, may work in this way so that oil companies can cut their losses. Indian Oil also warned that it might not have enough cash to import crude after September if prices remained high. After crossing $135 a barrel earlier, crude prices dropped to around $128 on Wednesday. Sources interpreted this as a ploy to pressure the government into releasing more money to oil marketers through oil bonds or by cutting taxes. Behuria's statement came in the backdrop of Indian Oil reporting a net loss of Rs 414.27 crore for the fourth quarter ended March 31, 2008. In the corresponding quarter of the previous year, it had scored a net profit of Rs 1,502.69 crore. Over the past one month, oil companies have borrowed Rs 5,000-6,000 crore to finance imports. Behuria was careful not to press the panic button. &ldquo;It is not a crisis situation or that we don&rsquo;t have (enough of) a product but obviously we are not going to import (more) diesel incurring a huge loss. Among petrol, diesel and LPG, it is obvious that diesel will get a beating,&rdquo; he said. The company says it is losing Rs 16.34 a litre on petrol, Rs 23.49 on diesel, Rs 28.72 on kerosene and Rs 305.90 on each cylinder of cooking gas. Behuria spoke of a spike in diesel sales over the past couple of months with demand growing at 25-30 per cent as opposed to an average of 6 to 8 per cent at other times. Part of the diesel consumption surge is explained by the 20-25 per cent growth in road freight. But the high diesel subsidy has created a market distortion where some factories that use naphtha as fuel or raw material have switched to diesel. Naphtha costs Rs 46 a kg while diesel comes for Rs 33.96 a litre in Calcutta. (Courtesy: Telegraph)