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Russia: Refiners rake in big profits from exports even as volumes shrink

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New Delhi: India’s refiners exported nearly 10% less diesel and petrol in 2022-23 than in the previous year although they gained in value terms, making 26% more in dollar and 35% more in rupee terms, helped by high global prices and a depreciated rupee.

It came amid reports last year that the country’s refiners were doubling down on exports to serve Europe, which was shunning Russian fuel.

Diesel and petrol exports combined amounted to $42 billion (about ₹3,33,620 crore) in 2022-23, securing higher profits to fuel exporters, mainly private sector refiners, and foreign exchange benefits to the country, according to the petroleum and natural gas ministry data.

“Indian refiners were merely shuffling barrels,” an industry executive said on condition of anonymity, adding that exporters probably only shifted supply from Asian markets to Europe.
A booming domestic market – India’s consumption of petrol and diesel expanded 14% and 12% year-on-year, respectively, in 2022-23 – also slowed the exports.

Refiners Rake in Big Profits from Exports Even as Volumes Shrink

“You can’t quickly increase your refining capacity. So, you have a finite domestic supply and a growing domestic market to serve,” said the executive.Diesel and petrol are mainly exported by private sector refiners which also sell a huge volume to state companies at international prices to meet domestic demand. Private sector refiners operate a small network of filling stations, which cut fuel sales last year to avoid losses after state oil companies froze retail prices. While their retail sales dropped, private refiners continued to supply fuel to state companies at international prices, the executive said.Diesel exports fell 12% year-on-year in volume terms to 28.5 million tonnes in 2022-23, the lowest in four years. But in value terms, exports rose 31% year-on-year to $28.9 billion, probably the highest ever. In rupee terms, the value rose 40% to ₹2,31,130 crore.

Refiners exported 13.1 million tonnes of petrol, 3% less than that a year ago. In value terms, however, exports fetched $12.8 billion, 17% more than in the previous year, or ₹1,02,489 crore, 25.5% more.

The crack spread, or the difference between the price of crude oil and refined product was far higher in 2022-23 than the historical average for petrol and diesel. The average petrol crack spread of $13.85 per barrel in 2022-23 was the second highest in 20 years while the diesel crack of $34.93 was the highest in two decades. The second-highest crack spread on diesel was $18.18 in 2008-09.

Rising prices in the global market pushed up domestic prices for a while last year, after which state-run oil companies stopped raising pump prices in line with global rates. The price freeze prompted private sector refiners to cut sales at their pumps.

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