American officials blowing hot and cold on India, ostensibly for buying Russian oil, need to only look at what an official of a previous administration said — ‘If something cannot go on for ever, it will stop’.
Known as the Stein’s Law, it was coined by Herbert Stein who was the Chairman of Council of Economic Advisors under Richard Nixon. The law is popular among economists and stresses on the how market forces will enforce discipline to unsustainable trends — economic or otherwise.
This narrative on India profiteering by purchasing ‘cheap’ Russian oil and selling its derivatives is one such unsustainable trend. Whether it is White House Trade Advisor Peter Navarro, or US Treasury Secretary Scott Bessent, they would like you to believe that Indian companies are making unacceptable profits through this ‘arbitrage’.
But scratching the surface a weeny bit, it becomes clear that this charge is baseless. In fact, hard numbers reveal that it is the US oil and gas companies that have profiteered from the Russia-Ukraine war.
What arbitrage?
Whether it is the refining margins or net profit, it is clear that no significant profit has accrued to Indian companies. From under 2 per cent of India’s oil imports in 2021, purchases from Russia in 2024 were at around 33 per cent. But check the Gross Refining Margin per barrel for Indian refiners in this period (FY22 to FY25), they have actually fallen. Had there been any profiteering, shouldn’t the GRM have moved up? GRMs for all Indian companies today (FY25) are below their levels at the time the Russia-Ukraine conflict started (FY22).
Data over the period of the conflict indicate that nearly all refiners gained from a spike in refining margins when the conflict started (CY22 for global players, FY23 ending March for Indian companies). While the margins doubled for refiners like BPCL in India and Marathon Petroleum in the US, it was even more for some. European major Shell benefited with more than a tripling of its refining margins per barrel from $4.79 in CY21 to $18.03 in CY22. Even more in the case of Total Energies. US refiner Phillips 66, too, gained with a near tripling of its refining margins.
Last week, Scott Bessent targeted Indian companies, apparently including Reliance Industries for making $16 billion in excess profits. But the actual numbers show that changes in the global oil industry dynamics due to the war have actually benefited European and US companies. This can also be gauged from their profits in CY22/FY23. The O2C segment of Reliance Industries, which houses its refining business reported profit before tax (PAT data unavailable) of ₹53,883 crore in FY23 or a little over $6 billion. This was up 20 per cent over FY22.
To the contrary, US refiners like Valero Energy reported a 900 per cent increase in net profits to $11.5 billion in CY22 while Marathon Petroleum reported a 205 per cent spike to $3.7 billion. Exxon Mobil benefited the most from the Russia-Ukraine war with profits increasing a staggering $36 billion in CY22 to $59 billion.
Meanwhile, Indian refiners such as IOCL, BPCL and HPCL reported losses due to under-recoveries. When the recent financial year data is also compared with the pre-war numbers, the US and European players’ refining margins and profits are better. For Indian companies, both are actually worse or flattish, despite all the increase in imports of Russian crude oil. Reliance Industries does not report GRM, but its recent filings indicate that the crack spreads (price difference between crude oil and refined products) are below five-year averages. So, the $16-billion question one may want to ask Scott Bessent is: Where is the arbitrage? And the note to Peter Navarro is ‘Russian oil is no blood diamond’.
Published on August 23, 2025
