Foreign trade of Petroleum
India is one of the fastest-growing economies in the world, which translates to a massive and continuously rising demand for energy. However, India’s domestic crude oil production is quite limited and cannot keep pace with this huge demand. This imbalance makes foreign trade in petroleum a highly critical aspect of India’s economy and national security.
The foreign trade of petroleum in India can be understood in two main parts: the import of raw crude oil and the export of refined petroleum products.
A. High Import Dependence (Buying Crude Oil)
India is highly dependent on other countries for its energy needs. Currently, India imports roughly 85% to 90% of its total crude oil requirement. This heavy reliance makes the Indian economy very sensitive to global oil prices and international geopolitical tensions.
Who are India’s Top Crude Oil Suppliers?
Historically, India relied almost entirely on the Middle East (West Asia) for its oil, particularly from countries like Saudi Arabia, Iraq, and the United Arab Emirates (UAE).
However, India’s “oil basket” has seen a massive strategic shift in recent years (especially between 2022 and 2026):
- The Rise of Russia: Following global geopolitical shifts and the availability of crude oil at discounted prices, Russia has rapidly emerged as the largest supplier of crude oil to India, accounting for over 30% to 35% of total imports in recent years.
- Diversification: To ensure energy security, India has actively diversified its import sources, purchasing oil from the United States, West African nations (like Nigeria and Angola), and Latin America.
B. Exporting Refined Products (Selling Fuel)
While India is a major importer of raw crude oil, it is surprisingly one of the world’s leading exporters of refined petroleum products.
Because India has established massive, world-class oil refineries (such as the Jamnagar Refinery in Gujarat), it possesses a refining capacity that is much larger than its domestic requirement. Therefore, India imports raw crude oil, processes it in its modern refineries, and exports high-value finished products like petrol, diesel, and aviation turbine fuel (ATF) to countries in Europe, Asia, and Africa.
Today, refined petroleum products are among India’s top export commodities, bringing in significant foreign exchange.
C. Economic Impact and Strategic Security
- Import Bill and Trade Deficit: Because petroleum is bought in US Dollars, a high crude oil import bill drains India’s foreign exchange reserves. When global oil prices rise, it widens India’s Current Account Deficit (CAD) and can lead to domestic inflation (rising prices of goods).
- Strategic Petroleum Reserves (SPR): To protect the country from sudden global supply shocks (such as wars or blockades in critical sea routes like the Strait of Hormuz), the Government of India has built massive underground rock caverns to store emergency crude oil. These reserves are located at Visakhapatnam (Andhra Pradesh), Mangaluru, and Padur (Karnataka). They hold enough oil to sustain the country’s critical needs for several days during a crisis.
Global Ranking in Refining and Supply
India ranks among the top five refining nations globally, thanks to its robust infrastructure and strategic geographic location. The country is the seventh-largest exporter of refined petroleum products. Facilities like the Jamnagar refinery, one of the world’s largest, underscore India’s dominance in the refining sector. This global standing enhances India’s energy security and positions it as a key player in international energy markets. International Energy Agency (IEA) in February 2024 assessed that India will become the largest source of global oil demand growth between now and 2030. India is the second-largest economy in biofuel blending, following Brazil.
India’s Global Ranking in Petroleum-Related Metrics
While India is a major importer of raw crude oil, it is surprisingly one of the world’s leading exporters of refined petroleum products.
Because India has established massive, world-class oil refineries (such as the Jamnagar Refinery in Gujarat), it possesses a refining capacity that is much larger than its domestic requirement. Therefore, India imports raw crude oil, processes it in its modern refineries, and exports high-value finished products like petrol, diesel, and aviation turbine fuel (ATF) to countries in Europe, Asia, and Africa.
Today, refined petroleum products are among India’s top export commodities, bringing in significant foreign exchange.
Metric | India’s Global Rank |
Exporter of Refined Products | 7th |
Ethanol Blending in Petrol | 2nd |
Biofuel Producer | 3rd |
LNG Terminal Capacity | 4th |
Refining Capacity (in MMTPA) | 4th |
