The exemption of US energy products from reciprocal tariffs comes as relief to the energy majors, with Indian exports of petroleum products likely to witness a muted impact, industry players say. The industry believes that tariff announcements are unlikely to pose a threat to the Indian oil and gas sector, at least, in the near term.
“US’s share in the Indian petroleum products export has been in the range of 6-8% over the last 2-3 years. This, coupled with the fact that petroleum products have been exempted from the recently announced tariffs, point towards a muted impact of these tariffs on Indian exports of petroleum products. Any change in the crude sourcing mix on account of these tariffs remains to be seen,” said Ankit Jain, Vice President & Sector Head, Corporate Ratings, ICRA Limited.
While the US imposed reciprocal tariffs of 26% on India, some goods including energy and other certain minerals have been exempted from the tariffs. The exemptions come as a relief to the energy markets which have been concerned about disruptions in flows and higher costs.
However, the tariffs wherever applicable might slow down the global economic activity, exerting downward pressure on crude oil prices. India, being one of the largest importers of crude oil, might stand to benefit from lower oil prices. Furthermore, the announcement only increases the possibility of strengthening of energy trade between the two countries.
“The Indian government has already indicated its willingness to purchase greater quantities of US crude oil and gas so US imports are expected to rise, but only to the extent that it is competitively priced. So, we don’t expect energy costs for the Indian energy sector to rise. If anything, the impact of overall tariffs might slow down global economic activity and exert downward pressure on energy prices, which might even be a benefit for the Indian economy in the face of export pressures,” said Kapil Garg Founder and Managing Director of Oilmax Energy.
The latest volley of US tariffs on all its trading partners is bearish for natural gas and LNG prices because of spillover from sell-off in broader financial markets in the near term, impact on global economic growth and gas demand due to trade deceleration and retaliatory measures targeting US energy exports, as per S&P Global Commodity Insights.
“We see this level of tariffs and a looming trade war as bearish for the global economy and oil demand and thus bearish for Platts Dated Brent. Nevertheless, if there is an escalating trade war and other adverse effects, then global oil demand growth might be cut by as much as 40% to 750,000 b/d in 2025,” said Wang Zhuwei, Asian oil analytics manager at S&P Global Commodity Insights.
Eric Yep, Team Lead, Asia LNG and Energy Transition News at S&P said that retaliation by trade partners could result in counter tariffs on US LNG in the short term and impact long-term LNG contract discussions and investments.
In the run-up to the tariff announcements, several countries including India, Japan, and South Korea had offered to boost US LNG imports through long-term deals and new projects like Alaska LNG.
“Recent data from the month of March has already indicated a large rise in US energy imports, as the government attempts to balance the trade surplus with the US by importing more of their crude oil and natural gas, and while this increase is expected to persist, the overall import basket is expected to remain diversified,” Garg said.
India’s import of crude oil in March touched 289,000 barrels per day in March, up from 113,000 bpd last year, according to data from Kpler, global real-time data and analytics provider. The country’s exports of petroleum products stood at 62,000 bpd last month, down from 91,000 bpd in the same period last year.
However, indirectly, cost pressures from equipment imports or currency shifts might nudge up expenses, but these are manageable given India’s inward focus and diverse suppliers, analysts note.
“India’s energy sector, particularly renewables like solar and wind, relies on imported machinery and components, some from the US. While energy commodities are exempt, tariffs on machinery (with a 5.3% tariff gap per GTRI) or electronics (7.2% gap) could increase costs for Indian firms if US-sourced equipment falls under the 27% levy. This might raise capital expenses for projects, though the US isn’t a dominant supplier here—China and Europe often lead,” said Sambitosh Mohapatra, Leader – ESG/Climate & Energy at PwC India.
Mohapatra highlighted that the tariffs hit competitors like China (34%) and Vietnam (46%) harder, potentially diverting US demand for energy-related goods elsewhere. “India could benefit if it ramps up exports of exempted energy products or related manufacturing, but its current capacity is geared more domestically or toward other markets,” he said.
With pharmaceuticals and energy exempt, India’s refining sector might see stable or slightly boosted US demand for petroleum products, as competitors face steeper tariffs.