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The Importance of Rising India-EU Petroleum Product Exports

Context

  • As the continent weans itself off refined goods from Russia as a result of the conflict in Ukraine, India’s exports of petroleum products to the European Union (EU) have increased significantly in recent months.
  • Higher shipments of processed goods to the EU at a time when India’s oil imports from Russia have risen to historic highs suggests that Indian refiners, particularly private sector companies, are trying to partially fill the supply gap for the area as it turns away from Russia.

Relevance

GS Paper-3: Indian Economy and issues relating to Planning, Mobilisation of Resources, Growth, Development and Employment.

Mains Question

Talk about the significance of the Russian oil price cap and the recent sequential increase in India’s exports of petroleum products to the EU. (150 words)


Important Points

  • According to an analysis of data from the Directorate General of Commercial Intelligence and Statistics, India’s exports of petroleum products to the EU increased by 20.4% year over year in April to January, reaching 11.6 million tonnes (DGCIS).
  • India’s refined product exports to the region increased sequentially for five consecutive months prior to the EU’s ban on Russian petroleum products starting on February 5, reaching 1.90 million tonnes in January, the highest monthly volume in the first ten months of the current fiscal.
  • Compared to the same period last year, the EU accounted for nearly 15% of India’s 79 million tonnes of total petroleum product exports.
  • Its share of India’s petroleum product exports increased from 16 to nearly 22 percent in the four months prior to the EU’s ban on Russian refined products.

Directorate General of Commercial Intelligence & Statistics (DGCIS)

  • The Directorate General of Commercial Intelligence & Statistics (DGCIS) is the leading government of India organisation for gathering, compiling, and disseminating trade statistics and commercial information.
  • The Director General, an Additional Secretary level officer of Indian Statistical Services (ISS), is in charge of this Directorate, which reports to the Ministry of Commerce in the Government of India and has its office in Kolkata.
  • It is the nation’s first large-scale data processing company serving as a nodal organisation for Export & Import data.

What Does India’s Rising Petroleum Product Exports to the EU Mean?

  • From the standpoint of the world’s oil markets, suppliers like India assist in preserving a demand-supply balance and averting sharp price fluctuations.
  • Countries like India, a major oil refiner, are helping to close the gap by purchasing Russian oil on the one hand and increasing the supply of refined products to the EU on the other. The EU does not want to buy crude as well as refined fuels and products from Russia.
  • India is a significant refiner, with a capacity of about 250 million tonnes per year.
  • Despite being one of the biggest consumers of crude oil, India is a net exporter of petroleum products because its refining capacity exceeds domestic demand.
  • The West’s punitive action against Russia’s oil and gas sector benefits Indian refiners, especially export-oriented private sector players Reliance Industries and Nayara Energy, because it enables them to buy Russian oil at a discount while earning robust margins on product supplies to Europe. As a result, even though the EU avoids purchasing oil and petroleum products directly from Moscow, some of it seems to be making its way to European co
  • Under the current conditions, India is now playing a more significant role in the supply map for refined products and crude oil around the world.

Petroleum products: What are they?

  • Materials derived from crude oil (petroleum) as it is processed in oil refineries are known as petroleum products.
  • Petroleum products are intricate mixtures as opposed to petrochemicals, which are a collection of clearly defined, typically pure organic compounds.
  • The vast majority of oil is transformed into petroleum products, which include a variety of fuel classes.
  • The majority of oil products, such as different types of fuel oil and gasoline, are used as “energy carriers,” or transportation fuels.
  • These fuels include gasoline, jet fuel, diesel fuel, heating oil, and heavier fuel oils, or they can be blended to produce those fuels.
  • Heavier (less volatile) fractions can also be used to create heavy oils such as lubricating, tar, paraffin wax, and asphalt.
  • Additional chemicals are produced by refineries, some of which are used in chemical reactions to create plastics and other practical materials.
  • Since sulfur-containing molecules in petroleum frequently make up a small percentage of the molecules, elemental sulphur is frequently produced as a petroleum product.
  • Hydrogen and carbon can both be produced as petroleum products in the form of petroleum coke.

What are the Western nations’ opinions on exporting more petroleum products to the EU?

  • According to international media reports, the US and other major Western powers are okay with India’s expanding supplies of refined goods to Europe, despite the West’s displeasure over India’s rising purchases of Russian oil in the wake of Moscow’s invasion of Ukraine.
  • This is primarily because, in their opinion, refiners in nations like India are responsible for maintaining the equilibrium and sufficiency of the global market for refined products.
  • The success of the price caps on Russian oil and refined products imposed by G7 countries and their allies without causing a global supply shock, according to many experts, depends on increased purchases of Russian oil and increased exports of petroleum products from nations like India.
  • In that sense, it appears that the West is okay with Indian refiners enjoying low prices on Russian crude and high profit margins on product shipments to the EU.

March 2024
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