India fits squarely into that category
Domestic petrol and diesel prices have remained largely unchanged since April 2022, despite sharp swings in global oil markets. As a result, rising crude costs are squeezing marketing margins for the country’s three major state-run retailers — Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).
Moody’s noted that these companies “will continue to bear the financial burden arising from elevated global energy prices,” reflecting their role in maintaining domestic fuel-price stability.
India’s oil dependence amplifies the risk
The pressure on OMCs is amplified by India’s heavy reliance on imported energy.Data cited by DSP Netra shows India consumes roughly 5.3–5.5 million barrels of crude oil per day, while domestic production stands at only about 0.6 million barrels, leaving the country roughly 85% dependent on imports.
Petroleum products already account for 25–30% of India’s total imports, making crude prices one of the most critical variables for the country’s macroeconomic stability.
The sensitivity is stark. According to the report, every $10 increase in crude oil prices adds roughly $12–15 billion to India’s annual import bill.
If oil prices were to surge towards $120 per barrel and remain elevated through FY27, India’s oil trade deficit could expand to nearly $220 billion, potentially pushing the current account deficit above 3.1% of GDP.
Historically, such episodes have triggered rupee depreciation of over 10%, alongside rising inflation and tighter liquidity conditions.
“This makes crude oil arguably India’s largest macro variable outside domestic policy control,” the DSP Netra report said.
Price controls shift the burden to fuel retailers
For India’s OMCs, the problem is not just higher crude prices but the lag in passing on those costs to consumers.
When global oil prices rise, procurement and refining costs increase immediately, while retail fuel prices remain stable due to government influence over pricing.
Moody’s said this dynamic “compresses marketing margins and weakens operating cash flows, particularly during periods of sustained high energy prices.”The impact was visible during the 2022 global oil spike following the Russia–Ukraine conflict, when Indian OMCs collectively incurred losses from selling petrol and diesel below cost. Those losses were later partially offset when crude prices softened, allowing companies to recover margins while pump prices remained unchanged.
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A similar pattern could unfold again if the current oil rally proves temporary.
LPG pressures and government compensation
The pressure is also visible in India’s liquefied petroleum gas (LPG) market. West Asia is the primary source of LPG for India, and supply disruptions triggered by recent geopolitical developments have tightened availability.
To maintain supply, the government has directed domestic refiners to maximise LPG production, while domestic prices were raised by ₹60 per 14.2-kg cylinder in March to reflect higher global costs.
Even so, Moody’s expects losses to accumulate because LPG continues to be sold domestically below market prices.
The government has previously stepped in to ease such pressures. A Moody’s Ratings report highlighted that in August 2025 the Centre approved around ₹30,000 crore in compensation for OCL, BPCL and HPCL after LPG-related losses in FY25 were estimated at around ₹40,000 crore.
How other Asian markets are managing the oil shock
Across Asia, governments are adopting different approaches to shield consumers from rising energy costs.
Countries such as Thailand, Indonesia and Malaysia rely on fuel subsidies, oil funds and compensation mechanisms to protect consumers. However, Moody’s cautions that the timeliness and adequacy of reimbursements vary, creating uneven cash-flow pressure for national oil companies (NOCs).
China’s oil majors face a comparatively lower risk. Moody’s noted that Chinese NOCs benefit from large upstream businesses, meaning higher crude prices boost earnings from exploration and production, offsetting weaker refining margins.
Additionally, China’s large crude inventories accumulated over the past two years provide a buffer against temporary supply disruptions.
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Meanwhile, Japan and South Korea rely heavily on strategic crude stockpiles rather than forcing national oil companies to absorb price volatility. Their energy systems focus primarily on national energy security, rather than stabilising retail prices through corporate balance sheets.
