"While India has the option to diversify its crude sources by turning to suppliers like the United States and the Middle-East, such a shift could disrupt refinery operations and potentially lead to higher diesel prices. This is particularly significant as India exports a substantial volume of diesel to Europe," said Arpit Chandna, an Energy Market Specialist at the London Stock Exchange Group (LSEG).
Arpit said that a fluctuation in global diesel prices due to EU sanctions could have a spill-over effect on Indian retail consumers, unless the government asks the refiners to absorb the increased costs.
"Indian refineries are well-adapted to processing heavy-grade Russian Urals, which make up about 70% of the Russian crude they import. Refinery throughput has increased in recent quarters, with record-high diesel exports in May — 906.03 Kt to Europe and 760.73 Kt to the Greater Singapore area. In June, India exported approximately 946 Kt of diesel to Africa, with July volumes again rising for both Europe and Africa," Arpit said, explaining the benefits accrued to Indian refiners by procuring cheaper oil and re-selling the refined products to other geographies.
"As a major crude importer and refined product exporter, India is now playing a significant role in influencing global energy prices. By purchasing discounted crude, India helps moderate global oil prices, while its diesel exports to multiple regions contribute to price regulation in refined product markets," Arpit said.