The ghosts of 2008-09 are back to haunt the public sector oil refiners. While that period is best remembered for crude touching $147 a barrel, an encore looks likely in the following weeks with Brent crude hovering around the $120/bbl mark on Thursday.

As Libya continues to simmer, the whole world is waiting to see if the crisis will spread to other oil-producing nations in West Asia. There is no telling then what impact this will have on crude prices which are already threatening to get out of hand.

As far as the trio of IndianOil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation is concerned, losses incurred on subsidised fuels are only going to skyrocket. “Most of us were reconciled to the fact that crude would be averaging at $90/bbl which, by itself, was bad enough. If this trend continues, we will be in big trouble,” an oil industry executive said.

Back-of-the-envelope calculations suggest that losses on petrol, diesel, cooking gas and kerosene would be in excess of Rs 100,000 crore in 2011-12 if crude were to stay at the $90/bbl range. However, these projections could go awry if oil supplies are disrupted as a result of the crisis. At one point in 2008-09, losses were estimated at over Rs 200,000 crore but crude prices began cooling off dramatically towards the last quarter.

“No such luck is expected during 2011-12. We know that this spurt is an aberration but, despite that, crude will stay in the $90/bbl range,” the executive added. The oil refiners believe there could be some good news in next Monday's Budget in terms of import/excise duty cuts on petrol and diesel. If this happens, a price hike could be contemplated only during the first quarter of next fiscal.

This is only one side of the story. The bigger challenge, sources say, lies in formulating a compensation package for the following fiscal. This subject generally gives nightmares to the upstream oil companies led by the Oil and Natural Gas Corporation with a little help from Gail and Oil India. And not without reason, considering that they coughed up nearly Rs 33,000 crore in 2008-09 as part of their share to keep the refiners afloat.

ONGC's forthcoming public offer is scheduled to take place next March and the Centre has constantly reiterated that the company's support to the refiners this fiscal would be capped at a third of their losses. “With crude prices now threatening to get out of control, investors would naturally wonder what is in store for ONGC in the future,” an oil industry official said.

This, in turn, begs the question: Will the FPO go as planned? IOC's was delayed when global crude prices were hardening. Today, they are on an unpredictable spiral and the impact was felt on Thursday when the Sensex shed 545 points. “ONGC's FPO will now depend on the Budget and its impact on the stock market. If there is no cause for cheer, it will be deferred,” the official added.

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