A Dynamic India has seen benefits from global crude oil prices. Russian crude imports have helped Indian refiners’ profits. India’s taking Russian crude at a discount from global prices has put some refiners in solid financial benefits. Indian policy and energy spending need to take advantage of the global conditions.
Refinery utilization has favored the Average Refining Gross Margin per refined barrel. The Average Gross Margin is a look at profits much like the Gross Margin is for manufacturing enterprises. In Year on Year rough comparisons major refiners have been seen to achieve:
Indian Oil Company/Chennai Petroleum AGM of USD$13.12, Year ago, USD$25.49
Bharat Petroleum Corp AGM of USD$15.42, Year ago, USD$22.30
Hindustan Petroleum Corp AGM of USD$10.49, year ago, USD$12.62
Reliance Oil E&P, AGM of USD$12.50, fuels dropped from USD$41.10 to USD$28.80
The higher 2022 numbers saw global conditions creating highly beneficial positions for Indian-based refining and crude operations. Current margins are lower with government Special Additional Excise Duty also reducing operating gross margins. Some comparisons are also more difficult as refinery maintenance, requiring shutdowns, is also conducted in the last half of calendar years.
Government ownership and control of refining and distribution capacity has placed a policy premium value on maintaining stability for Indian domestic energy pricing. Global instability and crude price swings since February 2022 have been domestically absorbed by Indian refinery margin management. This has benefited major areas of domestic consumption.
The global price swings for chemicals, fuels, and petroleum refined products have also been good and bad for Indian refiners. Lower global crude prices lower commodity refinery output prices. Global price swings for refined products, categories like VGO, Jet fuel, and Diesel; have been good for refiners with VGO and fuels capacity. The global commodity prices for chemicals and refined products have decreased margins for refiners with chemical production focus like Reliance (where a majority of profits come form those operations).
Continued global price increases, in response to events, will benefit Indian refiners who benefit from lower-cost Russian crude imports.
Indian government policy and private investment can use this global pricing period to:
Focus on energy infrastructure and production to advance the Government agenda for a green energy transformation (production of EV’s, grid improvements, electricity generation fuels, upstream petrochemical production) with specific mid-term deliverables
Plan for changes in cashflow as Special Additional Excise Duty (SAED) funds from export, refinery, and profits decrease with changes in global conditions (new found spend funds by Government to change to sustainable spending)
Support private investment to be steered to efficient projects as energy cost increases filter thru the domestic economy (reduce mid-term risks of insufficient production and generation)
This time period, although with some global instability, is a buffer for planning, decision making, and initiating transitions to longer term benefits. A Dynamic India progresses with improved energy security, a policy platform for mid-term green energy transformation, and support for the petro-chemicals to support products and pharmaceuticals.
For more about a Dynamic India see http://www.ekalore.com/india-business
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