Global conflicts disrupted India's fuel trade, reducing exports, altering crude sourcing, raising domestic fuel prices, and reshaping global petroleum flows.
Global conflicts, particularly the Russia-Ukraine war and the US-Iran conflict, have significantly altered international petroleum trade flows, creating both opportunities and challenges for Indian refiners. While India initially benefited from a surge in fuel exports, more recent events have led to a decline in outbound shipments and shifts in its role in the global energy market.
In March 2022, following Russia's invasion of Ukraine, Indian refiners experienced a substantial windfall. India, as the world's third-largest oil consumer, shipped near-record volumes of gasoline and diesel to capitalize on high profit margins abroad. This surge in exports occurred as global energy markets were disrupted, prompting buyers to seek alternative fuel sources amid potential sanctions on Russian oil and refined products.
The situation evolved significantly by 2026. In May 2026, India's fuel exports plummeted to a near four-year low, decreasing by 31% compared to the previous year. This decline stemmed from multiple factors, including the US-Iran war, which led to disruptions in the crucial Strait of Hormuz, thereby choking off crude and fuel flows. India also prioritized safeguarding its domestic supplies by increasing liquefied petroleum gas (LPG) production, a politically sensitive household fuel. Refinery maintenance further contributed to the reduction in overseas shipments.
The ongoing conflict in Ukraine has severely damaged Russia's refining infrastructure, forcing the traditionally major exporter of refined products to seek fuel imports. Consequently, India has emerged as an unlikely source of petrol for Russia, with Indian-refined fuel reaching Russia through international trading firms rather than direct exports from Indian refiners. This trend highlights the profound impact of sanctions and war on global petroleum logistics. Furthermore, the closure of the Strait of Hormuz due to the Middle East conflict compelled Indian refiners to purchase previously avoided Russian crude, often at a premium, to replace halted supplies from Saudi Arabia and Iraq.
The drop in crude imports from West Asia created domestic fuel shortages in India, particularly affecting industrial use. The Indian government responded by restricting gas usage for industrial and commercial purposes, leading to increased diesel prices. To curb exports and ensure local availability, New Delhi imposed an export tax on gasoline and increased windfall taxes on diesel and aviation turbine fuel (ATF). However, the effectiveness of these taxes in reducing exports remains contingent on the continued attractiveness of global refining margins.
Impact on Prices of Chemical Commodities Tracked by ChemAnalyst
The geopolitical disruptions are expected to exert bullish pressure on petroleum-based chemical commodities tracked by ChemAnalyst. Higher crude oil and refinery feedstock costs will likely increase prices of Naphtha, Benzene, Toluene, Mixed Xylene, Ethylene, Propylene, Butadiene, Polyethylene (HDPE, LDPE, LLDPE), Polypropylene (PP), PVC, Styrene, MEG, MTBE, and Base Oils. Rising freight rates and marine insurance costs will further elevate import expenses across Asia. LPG market tightness may also increase prices of propane and butane feedstocks. While stronger domestic fuel supply may temporarily stabilize India's local market, sustained geopolitical tensions and supply chain disruptions are expected to keep petrochemical prices firm to higher in the near term.
