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India, which introduced a windfall tax on its oil industry last year amid the oil price boom, has now cut the levy for crude oil and the export of jet fuel and diesel, Reuters has reported, citing government information.
The windfall tax was introduced in July last year as Indian refiners decided to take advantage of solid margins driven higher by robust demand and the energy supply disruptions in Europe. This advantage took the form of ramped-up oil and fuel exports to sell at higher international prices while domestic prices remained subdued.
More recently, however, refiners have been stocking up on cheap Russian crude redirected from Europe, possibly in anticipation of higher demand for fuels in the near future, after the European Union embargoed most imports of Russian fuels.
Meanwhile, Reuters’ Clyde Russell reported in a recent column that India and China were both raising their imports of Russian fuels. He cited Kpler data showing that Indian imports of Russian fuel oil had gone up to 4.484 million barrels in January.
This was three times as much as India imported on average in 2021 and just a little below the record imports of fuel oil from Russia for October, which stood at 4.88 million barrels.
Russell also noted that Chinese refiners could use Russian fuel oil to process into higher-value products as long as the price is low enough to make economic sense.
Meanwhile, the Economic Times reported that India may soon boost its imports of Russian gasoline and diesel, in addition to fuel oil. Citing unnamed sources, the report said some refiners planned to buy Russian fuels to sell on the domestic market and export their own products to the West.
Domestic demand for fuels may be about to rise further later this year as the government considers a cut in fuel tax as part of efforts to bring inflation under control.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com