The global diesel market has found itself in dire straits as the Russia-Ukraine war and the Iran crisis squeeze supply from multiple angles. Refineries across West Asia are processing much less than capacity, and Russia’s restrictions on diesel exports have removed another segment of seaborne supplies from the market. But India has remained largely unaffected by the growing crisis — remaining a major exporter and avoiding domestic scarcity. 

“Diesel exports from Russia, the Middle East and Asia were 1.3 million barrels per day  lower year-on-year, equivalent to about 20% of global seaborne trade. Jet fuel exports from these regions fell by around 670 thousand barrels per day YoY, equal to 34% of global trade,” the Paris-based International Energy Agency wrote in its August monthly report. 

LSEG data cited by Reuters also noted on Thursday that diesel cargoes now cost more than jet fuel in Europe for the first time in over a year. The continent has made efforts to replace lower Middle East air fuel shipments with other sources of supply, but struggles to secure more diesel for industry and agriculture. Europe and the United States have also shunned import of Russian diesel and other refined petroleum products for more than three years. 

According to a Reuters report, Europe has been able to pull in jet cargoes from the US and other countries like Nigeria as prices ​surged after the start of the Iran war. Despite these efforts, stockpiles have now fallen to their lowest levels since 2014 while European diesel profit margins hit a staggering all-time record high of $74.66 per barrel in end July. 

The role of India remains rather significant amid this crisis — with the country reportedly exporting an estimated 4.2 million to 5 million barrels to Europe in July. The world’s second largest crude importer has been stepping up fuel exports in the past year, capitalising on its position as a swing barrel supplier to markets both east and west ​of Suez.

How has India ‘escaped’ the global diesel crisis?

India does not import diesel as a finished product — buying massive quantities of crude oil and making use of domestic refineries. Data compiled by the Petroleum Planning and Analysis Cell in March reveals New Delhi exported 27.3 million metric tonnes of high-speed diesel during FY26.

“India is the world’s fourth largest refiner and fifth largest exporter of petroleum products, supplying refined fuel to over 150 countries. Because India is a net exporter to the world, domestic petrol and diesel availability is structurally assured. All 1 lakh-plus retail fuel outlets across the country are open and dispensing fuel without interruption. Not a single outlet has been asked to ration supply,” the Petroleum Ministry had stated in late March. 

Matters have remained much the same in the ensuing months — with the surging European demand and geopolitical supply disruptions ‘helping’ domestic refiners in some ways. Fuel exports however tumbled to the lowest level in nearly four years this May  as the Indian government moved to ensure domestic supply during the Iran war shock along with refinery maintenance. An interim US-Iran ceasefire and the accompanying rebound in export flows through the Strait of Hormuz had later propped up refinery runs, lowered prices and cushioned end-user demand.

The country also remains heavily dependent on Russian crude — rising to a record high of 2.78 million barrels per day in July as the US debated a 100% tariff. The discounted prices offered by Moscow have also helped contain oil import costs amid the West Asia crisis.

India’s oil import bill may rise sharply

According to data released by Kpler, India imported just over 5 million barrels per day (bpd) of crude oil in July despite geopolitical tensions in West Asia. Russian crude imports rose to around 2.8 million bpd during the month — rising steadily after a significant dip in May. Kpler data reveals that this accounted for more than 55.5% of the total crude imports.

Refiners in India had stepped up purchase of discounted barrels as European demand slowed amid the Ukraine war. The numbers have climbed steadily in spite of US censure, from roughly 1.8 million bpd on average in 2024. 

Experts suggest that the oil import bill could rise by $5 billion to $10 billion if India reduces its purchases of Russian crude by 50%. Economist and former UN advisor Santosh Mehrotra told news agency ANI recently that such a move could also push up inflation and put pressure on the rupee and current account deficit.

“If we have to reduce our purchases from Russia by 50%, then it will have an impact on the oil import bill of 5-10 billion dollars for the entire year. Its impact on inflation will be about 0.3 percentage point increase. And if the government does not increase the price of petrol and diesel on us, then we will be able to save ourselves from it,” Mehrotra said.

Bangladesh seeks additional fuel

The energy crisis has also affected neighbouring countries — with both Bangladesh and Pakistan feeling the pressure. Islamabad raised the prices of petrol and high-speed diesel on Friday amid continued fluctuations in international oil prices over renewed Iran-US hostilities. Meanwhile Bangladesh is grappling with its worst power crisis in years after a severe shortage of natural gas hit electricity generation. Limited gas supplies have reduced electricity generation, leaving the national grid facing a shortfall of several hundred megawatts during peak hours and triggering load-shedding in different parts of the country. 

The ⁠situation has ⁠been aggravated by the Iran crisis, which has disrupted energy markets ⁠and ‌increased volatility in global fuel ​and LNG prices. Bangladesh, increasingly ‌reliant on imported LNG as domestic gas production declines, is vulnerable to ‌supply disruptions and ​rising import ​costs. ​A recent outage at an LNG terminal further strained supplies, temporarily ​reducing gas flows to the national ⁠grid.

According to a Reuters report, the government issued a directive on Thursday for shops, markets and shopping malls to close by 8:00 pm in order to tackle the situation. Dhaka has also sought to supplement its diesel supply from India amid the crisis. According to an official release from March, New Delhi is supplying around 5,000 metric tonnes of diesel to its neighbour through the Bangladesh‑India Friendship Pipeline.

“We have an ongoing arrangement with Bangladesh for the supply of diesel. This continues insofar as the additional request that you mentioned is concerned. This will be examined keeping in mind our own requirements, our refining capacity, as well as the availability of diesel here in our country,” the Ministry of External Affairs told reporters during a briefing on Friday.