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Refineries hit a sweet spot-II: There are risks too
Jan 06: The future of the refining industry seems bright at this moment as disruptive technology such as electric cars and battery based power will only begin to bite at a later point in time. For now, deregulation, first-mover advantage and a growing market put the OMCs in a sweet spot as long as crude oil prices do not go through the roof.
8But there are also risks which are looming ahead.
And among them are:
8Rise in oil prices beyond USD60-65/bbl may bring deregulation of petrol, diesel and ongoing reforms in kero/LPG under pressure.
8Common carrier access to the product pipelines and other marketing infrastructure of the OMCs could lead to much faster penetration of non-OMCs into fuel retailing.
8The government has been pushing the OMCs to take on large volumes of investments in non-core segments and this may result in in capital misallocation.
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