One thing is often said in the world of stock market that the real test of management comes when there is turmoil in the market. The last quarter of the financial year 2025-26 posed such a tough test for the global energy market. Due to the Iran war and increasing geopolitical tension in the Middle East, the supply line of crude oil had completely collapsed. In such a situation, the country’s largest private refining company, Reliance Industries (RIL), not only overcame this crisis with its agility and precise strategy, but also did not allow any shortage of fuel in the domestic market. The company’s recent earnings presentation has made it clear how effective their ‘Plan B’ taken in difficult times was.
How did the world’s largest refinery deal with the Gulf crisis?
Reliance’s Jamnagar Refinery in Gujarat is the world’s largest oil refining complex. To run it at full capacity, millions of barrels of crude oil are required daily, a large part of which comes from the Persian Gulf. When the crisis on this route deepened due to the Iran dispute and the risk of supply disruption increased, Reliance did not waste even a moment. The company immediately shifted its dependence from Gulf countries to suppliers from other parts of the world. In business language it is called ‘supply diversification’. Apart from this, new routes were prepared overnight in collaboration with the suppliers to safely remove the crude oil that was stuck in the middle of the ocean. This one decision saved the work of the refinery from stopping.
Logistics optimized to reduce costs
The March quarter brought many big shocks in terms of business. Due to low availability of crude oil in the global market, not only were the prices at record levels, the cost of freight and insurance also started skyrocketing. On top of this, the re-implementation of Special Additional Excise Duty (SAED) in the domestic market was having a direct impact on the company’s profits (margins). From a business perspective, this was a double whammy for any company. But Reliance optimized logistics to reduce its costs. Instead of ordering many small cargoes, they were ordered by combining them together (cargo aggregation). Additionally, electricity costs were reduced by increasing the use of grid power in the refinery, which did not leave much of a dent on the company’s balance sheet.
How did the common consumer get relief?
Whenever the global supply chain deteriorates, the common consumer is the first to be hit. But in this entire incident, Reliance kept the needs of the domestic market on priority. The company redesigned its supply chain in such a way that there is no shortage of petroleum products in the local market of India. In view of the increasing demand of common man for LPG, the company diverted the supply of propane and butane towards LPG production. Apart from this, supply of KG-D6 gas to priority sectors was continued. The direct result of this was that despite this huge international crisis, no panic was seen at petrol pumps or gas agencies inside the country.
What does the outlook of the energy market say?
Reliance management clearly believes that volatility may continue in the global energy market in the coming days. There is a slight decline in worldwide oil demand in the year 2026. However, new refinery capacity is also expanding at a very limited pace, so fuel cracks (the difference between the cost of crude oil and the price of refined product) may remain high.
