Trump's Russia oil ban: Will India's petrol, diesel prices skyrocket?

New Delhi (The Uttam Hindu): The trade deal currently being discussed between India and the United States could come at a heavy price for the common man. Under his famous "America First" policy, US President Donald Trump has placed a very strict condition on India. The condition is simple: India must immediately stop purchasing oil from Russia and instead rely on the United States and Venezuela for its energy needs. Trump has clearly warned that if India does not do so, it could face a 25 percent tariff again. Amidst this diplomatic pressure, the biggest question that has arisen is: if India accepts this demand from the United States, to what extent will the prices of petrol and diesel in the country increase?

Breaking ties with Russia is not easy

India imports approximately 85% of its total oil needs from abroad, and in recent years, Russia has emerged as India's largest oil supplier. Statistics show that Russia alone accounts for nearly a third of India's total oil imports. Experts believe that completely halting Russian oil purchases would be a daunting task for India, although reductions have already begun due to pressure. According to a Reuters report, the impact on Indian refinery companies is already being felt. State-owned companies like Indian Oil (IOC) and HPCL have now begun turning to Venezuela. Meanwhile, private sector giant Reliance Industries has halted oil purchases from Russia and ordered a large shipment from Venezuela.

There is a big technical difference between American and Russian oil

This issue isn't just about politics, but also about the science and chemistry of refineries. Experts at Russia's National Energy Security Fund say that changing oil suppliers isn't easy. The technical difficulty is that the shale oil sold by the US is quite light and classified as gas condensate. In contrast, Russia's Ural crude is heavy and contains high sulfur. The problem is that many of India's refineries are specifically designed to process this heavy and sulfur-rich Russian oil. If India were to use American oil, it would have to spend a lot of money blending it with other grades. This means that replacing one oil with another overnight would be technically complex and costly.

It will have a direct impact on your pocket

Understanding the economics, Russia has been offering India a substantial discount on oil. Previously, this discount was $7 to $8 per barrel, but has now risen to $11. This means that buying oil from Russia is a highly profitable deal for India. On the other hand, according to a Wall Street Journal report, American crude oil will prove significantly more expensive for Indian buyers. Vortexa analysts estimate that if Indian refineries switch from Russian to American oil, they will incur at least $7 more per barrel. Furthermore, the time and shipping costs required to bring oil from the US Gulf Coast to India are also much higher than those from Russia. Clearly, if refinery companies' costs increase, they will not bear this burden. This will directly impact the common man in the form of increased prices at the petrol pump.