EY tells what helped India reduce impact of West Asia-led energy crisis: '…helped save refining costs'

Petroleum refining efficiency in India improved by about 33 percent in FY26 as compared to FY98, even as the country's crude oil import dependence increased to more than 90 percent in FY26 from 55 percent in FY99, according to a report by EY (Ernst & Young LLP).

The report claimed that India's strong crude oil refining capacity helped reduce the impact of the recent West Asia-led energy crisis on the domestic economy by avoiding the need for large-scale imports of refined petroleum products.

The report highlighted the evolution of India's petroleum economy, stating that while the country's dependence on imported crude oil has increased over the years, it has successfully built a significant refining capacity to convert crude oil into petroleum products.

It stated, "India may continue to augment its refining capacity, which has helped save refining costs had India been forced to directly import refined petroleum products".

Key findings of the report

According to the EY report, India's dependence on imported crude oil rose to more than 90 per cent in FY 26 from 54.9 per cent in FY 1999. At the same time, domestic crude oil production declined to 26 million metric tons in FY26 from its peak level of 35.9 million metric tons in FY12.

The report noted that growing demand for petroleum products has increased the need for imports. Domestic consumption of petroleum, oil and lubricants (PoL) products rose sharply to 243.2 million metric tons in FY26 from 90.6 million metric tons in FY1999.

Despite the increase in crude oil imports, India has steadily expanded its refining capabilities over the years. The report said this refining capacity has helped save costs that would otherwise have been incurred if India had been forced to directly import refined petroleum products.

According to EY, the country's energy efficiency has also improved over time. The report stated that the energy intensity of India's output, as well as the use of petroleum products in GDP, has fallen over the years. This, it said, augurs well for sustaining energy-efficient growth at a relatively high level over a longer period.

Looking ahead, the report suggested that India should prepare for future supply and price shocks affecting critical commodities such as crude oil, gas and fertilizers by building strategic reserves.

It is recommended that India augment its strategic crude oil reserves to reduce vulnerability to external disruptions. The report also called for a detailed strategy covering the volume of reserves, purchase plans and release mechanisms while taking into account carrying costs.

The report further said India should continue expanding its refining capacity to strengthen energy security and reduce dependence on imported refined products.

At the same time, EY noted that the growing dependence on imported crude oil needs to be reversed through greater exploitation of domestically available crude resources. It also recommended accelerating the transition towards greener energy options and alternative sources of energy, including nuclear power.