State-run oil marketing companies such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation may soon have to start raising retail prices in small tranches as the Indian basket of crude oil hit a decadal high of $121.28 per barrel on Friday.

The Indian basket represents a derived basket consisting of sour grade and sweet grade of crude oil processed in Indian refineries. India meets 85% of its oil needs through imports.

The government decontrolled retail prices of petrol and diesel long ago. But its influence can be gauged from the fact that OMCs have refrained from hiking prices since the last increase on April 6, despite huge cost pressures and rising under-recoveries, which now stand between Rs 18-Rs 21 per litre.

Petrol in Delhi is currently selling at Rs 96.72 per litre and diesel at Rs 89.62 per litre.

The Indian basket was averaging around $102.97/barrel in April. As of Friday, the average had risen to $118.34 per barrel. Brent crude for August futures on Friday fell a little to $122.72/barrel.

Earlier in the week, Goldman Sachs predicted Brent crude prices would hit $140/barrel during the July-September period and will remain high at $130 per barrel in the October-December period.

Any rise in retail petrol and diesel price has a cascading effect on inflation, which the government and its functionaries, including the Reserve Bank of India, are struggling to contain. It is currently ruling at an eight-year high of 7.8%.

Private sector oil marketing companies, however, have resorted to curtailing operations to avoid mounting losses.