The hidden cost of energy security: Why India's petrol and diesel exports are disappearing

India has long been one of Asia's leading exporters of refined petroleum products, supplying diesel, petrol and aviation fuel to markets across the world. However, May 2026 marked a significant change in that trend.

According to data from Kpler, India's refined fuel exports fell to around 878,000-930,000 barrels per day during May, the lowest level since October 2022 and significantly below levels recorded a year earlier.

At first glance, the decline may appear to be the result of routine refinery maintenance. However, industry experts say a much larger story is unfolding beneath the surface — one that highlights the growing importance of energy security in an increasingly uncertain global environment.

Why are petrol and diesel exports disappearing?

The biggest reason behind the decline is that Indian refiners are producing less export-oriented fuel and more LPG for domestic consumers.

Liquefied Petroleum Gas (LPG) is used by millions of Indian households for cooking and is considered one of the country's most politically and economically sensitive fuels.

For years, India has relied heavily on imports to meet LPG demand. Before the ongoing conflict in West Asia, roughly 90 per cent of India's LPG imports came from the Middle East.

As geopolitical tensions intensified and concerns grew over supply disruptions, refiners began adjusting their production strategy.

Instead of maximising output of petrol and diesel for export markets, they increased LPG production to ensure adequate domestic supplies.

The shift had immediate consequences. Every additional barrel of LPG produced meant fewer barrels of petrol and diesel available for overseas buyers.

Industry estimates suggest that refiners reduced petrol and diesel output by around 80,000 barrels per day while increasing LPG production.

As a result, exports of gasoline and diesel experienced some of the steepest declines among refined petroleum products.

The hidden cost of energy security

The reduction in exports highlights a trade-off that many countries face during periods of global uncertainty.

Exporting refined fuels generates foreign exchange earnings and strengthens India's position in global energy markets. However, ensuring adequate domestic supplies becomes the top priority when international supply chains face risks.

The conflict in West Asia has heightened those concerns.

The Strait of Hormuz remains one of the world's most important energy corridors. A significant portion of global crude oil and fuel shipments passes through this narrow waterway.

India is particularly vulnerable because it imports nearly 88 per cent of its crude oil requirements.

The country also depends heavily on the region for natural gas and LPG imports.

Any disruption to shipping routes could affect fuel availability and increase energy costs domestically.

Faced with these risks, policymakers and refiners have focused on building supply resilience at home, even if it means sacrificing export volumes.

Record LPG production becomes the priority

The policy shift is already visible in refinery operations.

India's refiners increased LPG production to a record 52,000 tonnes per day in May, approximately 50 per cent higher than the corresponding period last year.

This increase was aimed at strengthening domestic inventories and reducing vulnerability to external supply shocks.

For households, higher LPG availability helps protect against shortages and sudden price spikes.

For the government, maintaining reliable LPG supplies is crucial because cooking gas directly affects millions of families and has major economic and political implications.

The result is a clear change in refining priorities: domestic energy security now outweighs export growth.

Reliance refinery maintenance adds to the decline

Another important factor behind falling exports was planned maintenance at Reliance Industries' massive Jamnagar refining complex in Gujarat.

The Jamnagar facility is the largest refinery complex in India and one of the biggest refining hubs in the world.

Because the complex plays a major role in India's fuel exports, any reduction in processing rates can significantly affect export volumes.

Maintenance work during May lowered crude processing levels and reduced the availability of export cargoes.

At the same time, some fuels that would normally have been shipped overseas were redirected to the domestic market.

The combination of lower production and higher domestic allocation further accelerated the decline in exports.

Government and state refiners shift focus inward

State-owned oil companies also contributed to the export slowdown.

Officials sought to maintain comfortable domestic inventories amid global uncertainty and rising fuel consumption within India.

Rather than aggressively pursuing international markets, refiners channelled a larger share of their production towards domestic consumers.

The move reflects a broader strategic shift.

India's energy planners increasingly view fuel security not simply as an economic issue but as a national resilience challenge.

Ensuring uninterrupted access to fuel has become especially important at a time when geopolitical conflicts can rapidly affect global supply chains.

Export taxes add further pressure

Export economics have also become less attractive.

India imposed an export tax on petrol, reducing the profitability of overseas shipments.

At the same time, state-run oil marketing companies continue to face under-recoveries on some fuels sold domestically.

Government officials have indicated that losses on domestic LPG cylinders remain substantial, while domestic aviation turbine fuel sales are also facing under-recoveries.

These factors have further influenced refining and marketing decisions, making domestic supply considerations more important than export opportunities.

What does this mean for India?

The decline in exports does not indicate weakness in India's refining sector.

Instead, it reflects changing priorities.

India remains one of Asia's largest refining and fuel-exporting nations, with significant processing capacity and strong international demand for its products.

However, recent developments show that in times of geopolitical uncertainty, energy security can outweigh export ambitions.

The country's refiners are increasingly balancing two competing goals: earning revenue from international markets and ensuring that Indian consumers have access to affordable and reliable fuel supplies.

For now, the second objective is taking precedence.

The fall in petrol and diesel exports is therefore not merely a trade statistic. It is a sign of how global conflicts, energy vulnerabilities and domestic priorities are reshaping India's fuel strategy in 2026.