Page 6 - Policy Economic Report - April 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Impact of economic & global geo-political factors
on Oil & Gas sector in India

Impact of economic activity on demand of Petroleum products

In April 2026, the impact of strong PMI-led economic activity on India’s oil and gas sector is clearly visible
when supported with actual consumption and macro indicators.

The expansion in private sector activity (Composite PMI at 58.3) is one of the contributors for firm fuel
demand, particularly for transport fuels.

• Petrol consumption grew by 8.5% y-o-y in March 2026, primarily supported by sustained urban
mobility, rising passenger vehicle usage, and continued strength in consumption demand.
Additionally, some degree of precautionary buying was observed amid concerns over potential
supply disruptions linked to geopolitical tensions.

• Diesel consumption increased by around 7.41%, reflecting sustained mobility, freight movement,
agriculture and infrastructure activity. Demand was supported by ongoing logistics activity and
the rabi harvesting season. This is consistent with strong manufacturing output (PMI 55.9) and
services activity (PMI 57.9), both of which are energy-intensive sectors.

• However, this demand strength was not uniform across all fuels. Aviation turbine fuel (ATF)
consumption declined sharply by about 0.6% y-o-y in March 2026, primarily due to geopolitical
disruptions affecting flight operations.

• LPG consumption contracted by around 11 per cent, driven by elevated global LPG prices, supply
constraints and weaker refill demand.

• As a result, overall petroleum consumption marginally increased ~3.38% y-o-y in March 2026
despite strong transport fuel demand. This indicates that strong domestic transport demand could
not fully compensate for weakness in external and price-sensitive segments.

Impact of high global crude prices & weakened Rupee

• Risk premium driving India’s upstream inflationary pressures

The escalation of geopolitical tensions in West Asia during early 2026 has not only tightened supply
expectations but has also added a risk premium to crude prices. In the absence of actual supply
disruptions, this “fear premium” has pushed global benchmarks upward. The Wholesale Price Index (WPI)
inflation stood at 3.88%, with a significant contribution from crude petroleum and natural gas, indicating
rising upstream cost pressures feeding into the sector. At the same time, retail inflation (CPI) was 3.40 %,
suggesting limited room for aggressive fuel price pass-through without triggering broader inflation
concerns. Thus, the adverse impact is on OMCs as they are caught in a margin squeeze—buying expensive
crude but selling petrol/diesel at lower price.

April 2026 Page | 5