Top 5 Oil and Gas Sector Stocks in India by Market Cap | Oil and Gas Sector Analysis

In today’s article, we will know about an industry or sector that plays an important part in everyone’s life. I am talking about Oil and Gas industry then we will discuss the Top 5 oil and gas sector stocks in India. In terms of Oil and Gas industry, without it, society and the development in recent times wouldn’t be imaginable.

So we thought of analyzing this sector. We will let you know what the oil and gas sector is, how it works, how to determine oil prices in India, government rules. In the end, I will tell you about 5 big companies who run a business in this sector.

Disclaimer: This article is only for educational purposes. I do not recommend buy or sell so please consult your advisor and do your own research before investing.

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Oil and Gas sector Analysis

Let’s first talk about the industry. The oil and gas industry is a commodity where all development is dependent.
In terms of petroleum, petroleum has its own use and is used in making chemicals. Also, it is used in commodities of daily use.
Petroleum is used in pharmaceuticals, solvents, fertilizers, pesticides, synthetic fragrances, plastics, paints, artificial rubber, and many more.
In the whole world, oil is used for energy generation. In European Union, oil contributes 32% of the total energy generation. The Middle East contributes 53%. The production, distribution, refining, and retailing of petroleum taken represents the world’s largest industry in terms of dollar value.
Just the oil & gas drilling industry is expected to be at $2.1 trillion. So you can imagine how big this industry is including upstream and downstream.
The biggest producers of oil in the world are Saudi Arabia, the USA, and Russia.
These three countries alone account for 43% of world oil production.

The Oil & Gas industry is divided into 3 main parts-

Top 5 oil and gas sector stocks in India

Upstream,
Midstream,
and Downstream.

Now I will explain to you in detail the industries in it. Under the oil lifecycle first comes the exploration, development, and production of crude oil or natural gas. It is done via upstream companies.

In Midstream companies, it does the storage and transportation. In Downstream companies, they use oil to make derivative products that are used in chemical industries.

How to determine the prices of oil?

Oil prices are determined by the trading price of oil in the futures market in the world.
This price is dependent on the supply-demand. Demand for the commodity is fixed and growing steadily.
More important supplies. Here comes OPEC, which you must have heard. OPEC is the Organization of Petroleum Exporting Countries.
OPEC countries decide the supply of oil. If oil is produced less, demand remains the same or goes up then the price will go up.
If production increases, supply increases, oil prices reduce. The factor we talked about is OPEC countries which determine oil prices.
But there are more factors affecting supply. The second is Natural disasters. Suppose there is a natural disaster and it affects the world’s supply of oil, then because of the increase in demand, prices will go up.
From time to time petroleum is explored and if oil is found in a new place, then supply will increase and the price will go down.
After talking about the oil and gas industries, now let’s talk about India’s oil and gas industries.

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India’s oil and gas industries

Before going to this, I’ll show you important details above chart which will tell how India’s oil and gas industry works.
India is the 2nd largest importer of oil in the world after China. It imported around 205 million tons in 2019.
The country imports around 80% of its oil requirements and 45% of its natural gas or LNG requirements.
So you can understand India’s dependency on other countries for oil and gas imports.

How petrol and diesel prices in India are determined?

We take daily by the average crude oil price in the last 15 days and Excise duty is added to it.
Then the margin of dealers who retails it is added and then value-added tax is added- the final price comes which we consumers pay.
After knowing about the whole industry, let’s see what is currently happening in the oil sector and important thing for you to know if you are thinking of investing in it.
Recently the shoot in demand increased coal prices and few places saw an energy crisis which mainly started in china.
Energy requirement has increased in the world after covid.
This sector came in limelight. The oil and gas sector is critical as its price inflation affects India as its use in daily items.
Inflation in India depends on oil prices. For which government takes steps time-to-time to control it.

Advantages of Oil & Gas Sectors

Now, let’s know the advantages for India in this sector. As you can see on my screen, the first is growing demand.
The energy demand in India has increased. India is 3rd largest energy consumer in the world.
Also, demand for diesel has increased recently. By 2030, the demand may double. The second factor is Rapid Expansion.
More expansion in the economy will be seen in recent times. This will increase demand in the sector.
The third is Supportive FDI guidelines. In India, these guidelines have been eased which boosts this sector.
Last is Policy Support. In the 2021 union budget, the government allocated funds worth 12480 crores where the direct benefit will be transferred of LPG. there has been good policy support which showed development in this sector.

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