Monday, 28 September 2026

The E20 Saga – Is it Worth the Gamble?

Ethanol blending has become a raging discussion globally, especially in India, after the ongoing West Asia conflict and the resulting oil crisis. The types of Ethanol blends that have evolved over the years include E5 to E10 to E15 to E20, and the latest E85 (currently available to a small network of 48 public sector fuel pumps) and E100 (currently available at a small number of pilot gas stations in select regions that include Delhi NCR (namely Delhi, Gurugram, Noida, and Ghaziabad), Uttar Pradesh, Maharashtra, Karnataka and Tamil Nadu). The ethanol blend ratio of E85 and E100 was approved in India in June 2026. Ethanol blending came along with its own set of advantages and disadvantages, and while the larger intent behind the mandatory E20 push from April 2026 (for all petrol vehicles) as part of India’s move to reduce reliance on oil imports and secure supplies to mitigate energy crisis seems good, it has been viewed by many as a knee-jerk reaction. While this article attempts to evaluate the pros and cons of this mandatory E20 push, it would be imperative to first understand the evolution of the Ethanol-blended fuels, how did the western world adapt to it, their continuous evolution on blended fuels, and how did India execute the same in comparison.

The Evolution of Ethanol-Blended Fuels in the Western World:

The relationship between ethanol and internal combustion engines traces back to the dawn of the automobile industry. Henry Ford’s Model T, designed in 1908, was configured to run on ethanol, gasoline, or a combination of both. Early automotive engineers valued alcohol for its high-octane rating, which prevented engine "knocking", the premature detonation of the air-fuel mixture under compression.

E5 and E10 was popularised as a result of the 1990 Clean Air Act Amendments in the U.S. It was also a measure towards fostering energy security and reducing carbon emissions. In reality, it was the oil crisis of 1973, where the gasoline prices had skyrocketed, which enforced a renewed interest in plant-based fuel as an alternative. The use of ethanol blends was triggered due to the 1973 oil crisis that caused severe spikes in global crude oil prices, which exposed heavy import dependencies and forced nations like Brazil and the U.S. to seek domestic and renewable fuel alternatives.

The U.S. implemented a gradual phase-out of pure gasoline (E0) and did not force an overnight switch to higher blend ratios. To protect owners of older, non-compliant vehicles, the U.S. government used a system of dual-fuel availability at gas pumps rather than making higher blends mandatory for all cars at once.

Talking about Europe, ethanol blends came into existence in 1860 when German inventor Nicolaus Otto used ethyl alcohol as a fuel in an early combustion engine prototype. By the 1890s, both France and Germany had started testing Ethanol blends to decrease dependence on oil imports and create self-sufficiency. Then due to the fuel shortages during World War I and II, European countries had to make ethanol blends. However, the demand for ethanol diminished when petroleum was available at cheaper rates post World War II.

In 2003, the EU had imposed the Biofuels Directive, which set a target for member states to replace 5.75% of their transport fuels with biofuels by the end of 2010. The European fuel quality standards approved up to 5% ethanol in standard petrol (E5). Meanwhile, countries like Sweden and France were rolling out E85 alongside flexible-fuel vehicles (FFVs).

In 2009, the EU adopted the Renewable Energy Directive, which mandated that 10% of transport energy should come from renewable sources. An updated Fuel Quality Directive allowed up to 10% use of ethanol in standard petroleum (E10). France was one of the first European nations to make E10 available nationally while Germany made E10 available nationally by 2011, even though the lack of compatibility of cars with E10 made it prone to consumer resistance.

By 2025-26, the EU updated its Fuel Quality Directive, which supported a higher blend of E20 in standard petroleum to support its transport decarbonization strategy. The present policy focuses on second-generation ethanol derived from agricultural waste, residues and non-food biomass.

Europe utilized a gradual, phased-out approach rather than an overnight transition. To protect earlier, non-compliant vehicles, the European Union implemented a strict protection grade strategy. When a higher blend became the standard regular option, fuel stations were legally mandated to continue selling the lower blend as a premium grade to accommodate older cars.

While ethanol blending offers clear benefits for reducing carbon intensity in traditional internal combustion engines, the sector continues to evolve alongside vehicle engine technology. Modern challenges concentrate on engine compatibility, ensuring older engines and smaller equipment handle the corrosive properties of higher alcohol concentrations, and mitigating phase separation caused by water absorption.

As we continue to deep-dive into understanding the adaptation and evolution of ethanol-blended fuel in the western world, taking Brazil as a case example would be the best choice as it is a textbook case of how the infrastructure should support the ethanol blends.

Adaptation and Evolution of Ethanol Blended Fuels in Brazil – A Case Study:

The evolution of Ethanol blending traces back to the early 1900s in Brazil, when E5 came into existence (1930s). E5 is referred to as the combination with 5% ethanol and 95% petroleum or gasoline (as called in Brazil). This was done to deal with the problems of oil disruptions and sugar surpluses prevailing in Brazil. This was an advantage to the Brazilian economy as it reduced the costs needed for crude oil imports, led to lower vehicular emissions of carbon monoxide, and created a profitable market for surplus agricultural produce.

By the 1970s, Brazil was heavily reliant on oil imports (~80%), putting it at a higher risk of petroleum shortage. The 1973 oil crisis forced Brazil to increase ethanol blends in fuel, cut down on imports and utilise surplus sugar production to increase self-reliance. Production rose from ~0.6 billion liters in 1975 to 3.4 billion liters by 1979, then reaching ~12 billion liters in the mid-to-late 1980s.

The time-frame for Brazil to transition from pure gasoline (E0) to commercial pure ethanol (E100) took just 4 years, though building a fully integrated, flexible ecosystem took roughly 3 decades.

Brazil has vast feedstock and sugarcane production areas which produce sufficient amounts of sugarcane every year to fulfil requirements for both ethanol as well as sugar. Brazil comes among the top sugar producers in the world and its sugar mills are used both for sugar as well as ethanol production, thus rolling out both refined sugar and ethanol for both domestic use as well as exports. Their national ethanol storage capacity is ~19 billion litres.

They also have an efficient logistics network, where ethanol blended fuel is transported via pipeline mode. In order to avoid phase separation, sometimes anhydrous ethanol is blended at the distribution channels itself. Distributors like Ipiranga and Vibria Energia operate at more than hundred bases. At gas stations across Brazil, both blended and pure ethanol fuels are available, catering to all forms of cars on the road. This infrastructure creates resilience; production can shift between sugar and ethanol, vehicles can switch fuels, and the distribution network already reaches most of the country.

The Issue with Ethanol Blending in India:

In India, ethanol blending in fuels began in 2001 as a result of a pilot program, and by 2003, E5 was officially launched as a viability test in Andhra Pradesh, Goa, Gujarat, Haryana, Karnataka, Maharashtra, Punjab, Tamil Nadu, Uttar Pradesh, Pondicherry (Puducherry), Dadra and Nagar Haveli, and Daman and Diu. E5 was in steady demand until the 2010s, when there was a hike in the prices of sugarcane along with inconsistent yielding. The government helped in stabilizing the supply by utilizing surplus and damaged foodgrains. Then E10 was introduced and the average blending reached 8.1% by 2020-21, and by April 2022, E10 became available nationally. The main reason why E0, E5 and E10 worked wonders is because when they were launched, India had the needed resources and infrastructure to ensure a seamless usage.

The demand for E20 in India has increased of late after the Middle East oil crisis. India's demand for E20 fuel surged in 2026 due to an aggressive nationwide roll-out by the government, making 20% ethanol-blended petrol mandatory across all retail outlets from April 1, 2026. This accelerated a multi-year transition to meet ambitious energy security and agricultural support targets ahead of schedule. The primary reason for this was to decrease reliance on exports for fuel which was a good initiative, but it was a house built with cards. A concentrated effort of all stakeholders in the car industry (fuel producers and distributors; fuel storage infrastructure at production, major depots, and downstream storages i.e., fuel stations; insurance; automobile components and ancillaries; electrical and wiring industry; etc.) was needed to make it a successful attempt.

This West Asia crisis opened higher revenue opportunities for ethanol companies in India. Before the West Asia war, ethanol companies in India faced subdued profit margins due to administered pricing, local overcapacity, and idle surplus. After the conflict spiked global crude oil prices, profits remained largely stagnant or restricted because the government tightly regulates and caps ethanol procurement rates near ₹70 per litre, preventing windfall gains despite surging national demand.

Even though ethanol blending is a good and economical alternative to fuel for India, this move of theirs backfired badly because they fast tracked the implementation of E20 without considering the much-needed vehicular infrastructure of India.

In Brazil as well as other places in the U.S., the vehicles were built in a way which could be compatible with E20 fuel. However, before E20 was popularised in India until a few months ago, more than ~75-80% of the vehicles on road were incompatible with E20 and were more compatible with E10 or other lower fuel blend ratio.

The problem aggravated because E10 is no longer an available option at any petrol pumps in India after the mandatory roll-out of E20. E10 has been fully replaced with E20 at all petrol pumps across India. Only premium petrol of higher octane (such as XP100, Power100 and Speed100) is available at select petrol pumps across India at the moment, and it was never largely in demand to begin with.

The ripple effect of this decision will affect other automobile sectors as well. If we look at it from a layman point of view, since maximum vehicles are not compatible with E20, the owner of those vehicles will either significantly reduce the usage of their vehicles to a bare-minimum in order to minimize the structural damage to the vehicles caused by E20 fuels, or they will migrate to higher octane premium fuels. On the other hand, the owners who need to use their vehicles regularly will compromise on the car’s working by force-feeding the E20 fuel to it despite its incompatibility. This will increase the revenue generated by the car repairing and servicing centres, both owned by the authorised dealer workshops as well as the localised third-party companies and garages.

Because of the issue of E20, the demand is slowly shifting towards diesel cars, though the shift is more towards CNG, hybrids and EVs. The share of conventional petrol vehicle sales has dropped to a historic low of 41% from a year-ago share of 46%, with the alternatives (CNG, EVs and hybrids) surpassing it for the first time. The steady increase in diesel resulted in a niche revival of SUVs.

According to the SIAM data, the decrease in demand for petrol cars has led to a vast inventory of petrol cars piling up at dealerships. The inventory has stretched to a margin of 60-70 days, which is almost twice the previous margin, which was about 30-33 days.

The Way Forward for India in the Ethanol Blended Fuel Migration:

E20, in reality, is an excellent initiative and it could have been proved to be an important milestone achievement in the petrol industry in India, had the planning been right. The only reason why this initiative worked in the U.S., Europe and Brazil, in particular as a text-book case, is because of the apt and robust infrastructural planning and development.

Ideally, the right approach should have been keeping E10 available alongside E20. According to statistics, car manufacturers started rolling out E20 compatible vehicles after 31st March, 2023. Also, every car has a registration validity of 15 years and it can be renewed for two rounds of five years each by paying green tax, and the renewal is applicable in all regions except the cities in the Delhi-NCR region, and with elevated green tax charge in cities like Mumbai, Bengaluru, Kolkata, Chennai, and Hyderabad. So, even if E10 compatible cars are purchased in early 2023, the demand for E10 will mostly fizzle out by early 2048 after factoring in two rounds green-tax extension. Therefore, after 2048, E10 could have been totally discontinued.

Another alternative could have been promoting the use of Electronic Vehicles (EVs). Although it is a promising move, a rapid, forced overnight shift poses major hurdles due to infrastructure gaps. The problems surrounding EVs are heavy costs, low affordability, and difficulty in seamless availability of charging points throughout the country.

Therefore, to conclude, while the mandatory E20 roll-out to reduce import dependency on oil supplies is a very good initiative, it will bear the fruit only if it’s planned and executed properly in a time-bound manner.

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Monday, 8 June 2026

WEST ASIA CRISIS AND ITS IMPACT ON GLOBAL TRADE AND ECONOMY

What Sparked the Conflict in West Asia?

On February 28, 2026, the U.S. and Israeli forces joined hands in order to target Iran’s nuclear and ballistic missile capabilities with the aim of neutralizing it. This air strike was known as ‘Operation Epic Fury’. In retaliation, Iran targeted Israel’s bases and allied countries of the U.S. in the Arab world where the U.S. has its military, air force and naval bases. The situation drastically escalated when Iran's Supreme Leader Ayatollah Khamenei was killed in a deadly strike in response to stalled negotiations regarding Iran’s alleged nuclear program.

What is Iran’s ‘Mjolnir’?

Iran possesses significant military, legal and geographic control over the Strait of Hormuz. The Strait of Hormuz is responsible for 25–30% of the global oil supply and consumption, i.e., it supplies ~21 million barrels of oil per day. This major chokepoint handles almost the entirety of Qatar’s LNG supplies along with major exports from Saudi Arabia, UAE, Kuwait, Iraq and of course Iran.

Apart from oil, the Strait of Hormuz also handles fertilizers (~30% of global fertilizer trade), especially urea and ammonia that accounts for roughly 30%–35% of global urea exports and 20%–30% of global ammonia exports.

In addition to the above, the Strait is also responsible for supplying half of the world's seaborne sulphur, one-third of the world’s seaborne methanol, and a significant share of helium, aluminium, food and agricultural products, and general goods and consumer products.

Therefore, with 25–30% of the world oil supplies, 20–25% of the global gas supplies, and ~30% of global fertilizer supplies, the Strait of Hormuz becomes the most critical chokepoint in the global supply chain, thereby giving Iran the ability to exert significant influence and a bargaining power at the negotiating table.

How did Iran create a domino effect on the global economy and supply chain with its Mjolnir?

Iran was well aware of the weightage Strait of Hormuz carries and the power it possesses over its control. Iran, whose armed forces were of no-match to the U.S. and Israel’s military, soon outgunned the U.S. and Israel by extracting leverage from the economic benefit they held. Iran also knew how the blockage of the Strait of Hormuz will lead to a massive spike in the oil prices all over the world, in turn impacting the fuel prices and creating a domino effect on retail inflation. So, in order to get back at the U.S., Israel and their allies, Iran exercised its power to strategically cut off the lifeline and disrupt the global supply chain. In a statement, Iran’s foreign minister Abbas Araghchi said “Iran has an upper hand to decide which countries’ ships will pass through the Strait of Hormuz”.

Thus, on 2nd March, 2026, Iran went against the laws of the international waters and closed all forms of operations in the Strait of Hormuz, enforced by the Islamic Revolutionary Guard Corps (IRGC). IRGC threatened merchant vessels (MVs) using sea mines and naval actions. During this period, they allowed the MVs of countries who didn’t support the war to pass through the Strait, i.e., India, Pakistan, Türkiye, and China, while blocking the vessels belonging to the U.S., Israel, and their allies. The vessels that were allowed to pass through the Strait were under IRGC surveillance until they exited the Strait into the Arabian Sea.

While the Strait of Hormuz accounts for about 25–30% of the world’s global oil supply, the impact, as a fallout of the chokepoint being closed, on the global crude oil prices was quite significant. Just ~1 million barrels per day of oil flowed through the Strait during the period of it being closed. This dried up the supply of the remaining ~20 million barrels per day of oil handled on this route. As a result, the oil import dependent nations, especially those procuring a sizeable basket from the Strait of Hormuz route, scrambled to secure their supplies from other global suppliers outside the Middle-East region. This Geopolitical situation not only pushed up the global oil prices, but also disrupted the global supply chain that increased the economic cost of operations for the countries, thus leading to cost-push inflation globally. In other words, the disruption in the global supply chain has tied the usage of every single process in it to oil – directly or indirectly i.e., the domino effect, and therefore, the supply of oil becomes the most critical component in the global supply chain ecosystem.

Adding to the woes, in March 2026, Iran attacked and destroyed Qatar’s Ras Laffan Industrial Complex LNG Terminal – the largest LNG export facility in the world accounting for about 20% of the global LNG supplies. The LNG trains and GTL plant are expected to take 3–5 years for its repairs, thus impacting the LNG supplies for a considerable period of time.

However, with the improvement in the flow/supplies of oil through the Strait of Hormuz, in the present scenario, to about 15 million barrels per day, crude oil prices have eased a bit from a high of ~$120 per barrel in early April 2026 to about $95 per barrel as of June 4, 2026 (prices of Brent Crude).

West Asia War - Impact on Indian Economy?

India imports more than 30% of its crude oil imports, 70% of its LNG consumption and 90% of its LPG imports from the Strait of Hormuz. This, in itself, tells the scale of impact that the Indian economy had to brace with the supply chain in the Strait being disrupted. The inventory for oil (including strategic reserves) lasts for almost 2.5 months, the inventory for LPG (including strategic reserves) lasts for almost a month, and the inventory for LNG (including strategic reserves) lasts for about a fortnight (14–15 days). The blockage of this strait has pushed India to diversify its supply, on an emergency basis, by importing from almost 40 other suppliers globally, bypassing the Strait of Hormuz and bringing in ~70% of oil from conflict-free zones. This had a manifold impact on India’s supply chain and economy:

India had to procure oil at a higher price due to the leverage it lost as a result of the Strait being closed;
The cost of freight significantly increased because now sourcing oil inventories from other suppliers across the globe has led to longer shipping routes and the resultant higher transit cost;
The average delivery time, depending on the suppliers’ nation, would take anywhere between 20–50 days as opposed to the earlier 2–4 days when the oil cargoes were shipped through the Strait;
In order to ensure that the oil and gas inventory levels don’t deplete below the threshold level, India had to scramble to secure supplies outside the Strait, and, in the process, lost its bargaining power for procurement;
As a result, the high oil prices together with higher freight cost had a double-whammy impact on the oil prices in India; and
The above led to a domino effect on the non-oil sectors, thereby leading to an overall cost-push inflation

Impact on Balance of Payments:

As mentioned in the previous section, the double-whammy impact on oil prices means that India would now have to pay more dollars to purchase crude oil. This increases the expenditure in comparison to the receipts, thus creating a deficit in the current account. In addition to this, a lot of election campaigning measures, like distributing freebies, were carried out during the April 2026 state elections in India. This further worsened the fiscal deficit, and, as a result, the current account deficit also increased. This increase in current account deficit leads to currency depreciation, i.e., weakening of the rupee against the U.S. dollar. That is because the deficit needs to be financed, and it will be done by external commercial borrowings (ECBs). Depreciation of rupee results in cheaper exports and expensive imports, which means it would further increase the cost for India to import crude oil, or for that matter any other goods/services.

What is the Mitigation Strategy Adopted by Countries Worldwide?

The West Asia war has forced nations to seriously consider building oil routes bypassing the Strait of Hormuz so that any future conflict in the region may not impact the global supply chain to the scale it has currently impacted. While alternative routes bypassing the Strait exist - the East-West pipeline across Saudi Arabia that ships through the Red Sea and the Abu Dhabi Crude Oil Pipeline that ships through the Gulf of Oman – they allow for limited mitigation with a supply of ~5 million barrels per day and can’t be used as a replacement for the Strait.

To Summarize:

At the moment, the smartest thing for India would be to aggressively make investments in upstream (from discovery to exploration & production) and midstream (transportation via shipping or pipelines to refineries) assets, long-term reliable oil & gas suppliers and protection against forex fluctuations. The Strait of Hormuz blockage imparts a very important lesson to India of ‘not putting all your eggs in one basket’. The heavy reliance of India on this Strait for its oil & gas requirements led to a significant economic impact. It is, therefore, important for India to have reliable and long-term partners from other parts of the world, for oil & gas supplies, in addition to the Middle east partners. This will ensure guaranteed volume supplies at a pre-agreed price range and provide downside protection from vagaries in the oil sector.

Moreover, it is also important for India to ramp up their current inventory levels and Strategic Petroleum Reserve (SPRs) so that during moments of unfathomable crisis, the nation manages to sail through by using some of these SPRs as the last straw before replenishing the stock again. Lastly, India should work towards enabling penetration of Piped Natural Gas (PNG) to households (urban and rural) and commercial establishments because it is not crude oil dependent and can be produced domestically in large volumes.

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