What is oil, actually?

0:00In today's episode, we'll break down two important stories. First we'll talk about the many lives of crude oil and then we'll talk about maruti's twist with EVs. Welcome back to the daily brief by Zeroda where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara and today is Friday 13th March, coming to the first story. Every time you might open Twitter or scroll through the news, you'd probably see reports of an LPG shortage or that countries are releasing their oil reserves or that NAFTA prices are up and so on. The easiest thing for most people is to skim past it and get on with their day. But this week it got harder for all of us to look away as this crisis arrived at our literal doorsteps. Restaurants across India are closing early due to a shortage of gas and as a replacement for gas, Indians are buying induction cookers at unforeseen levels.

1:00People are trying to stockpile LPG cylinders and crude oil briefly touched 120 dollars a barrel, a level the world hadn't seen since 2022. And just two days back, the IEA did something it's never done in its 50 year history. It agreed to release 400 million barrels from its member strategic reserves more than double water released after Russia invaded Ukraine. In the midst of this, we had to admit something to ourselves. There are so many terms and byproducts around oil that we didn't fully understand. What has one thing got to do with another? What's oil essentially and where do all these other things like LPG and LNG even come from? Let's start from the very beginning of life itself. So about a hundred million years ago, vast quantities of tiny marine organisms like algae and bacteria died and sank to the ocean floor. For millions of years, they were buried under layers of sediment and rock and the immense heat and pressure of the earth slowly cooked these organic remains, transforming them into

2:01a thick liquid trapped inside rock formations that lay deep underground. That liquid is crude oil. Crude simply means raw and unprocessed, exactly as it came out of the ground. Petroleum is just another word for the same thing. Now, not all crude is the same. It varies along two dimensions that matter enormously for how it's prized and processed. The first is weight, whether the crude is light or heavy. Light crude has more of the shorter, simpler hydrocarbon molecules, meaning refineries can extract more petrol and diesel from it with less effort. Heavy crude oil has more of the thick, complex molecules that are harder to work with. The second is sulfur content, whether the crude is sweet or sour. Sweet crude has very little of it and requires less processing and sour crude is loaded with sulfur and needs to be treated for use. We covered this briefly in our story on Venezuelan oil. Now, most Middle Eastern crude, Saudi, Iraqi, Kuwaiti, Iranian, tends to be heavier and sourer. The upcake facility in Saudi Arabia that we wrote about last week, the one that processes

3:047% of the world's oil, exists primarily to remove sulfur from the region's crude and make it sweet. In contrast, much of the US and Norwegian crude is lighter in sweeter and commands a premium for that reason. It's partly why there are also the basis for WTI and Brent, the two global price benchmarks in oil. Ultimately, the goal of every refinery in the world is the same. Take whatever crude arrives and convert it into something useful. Now, to make crude oil useful, you have to take it apart. And for this, we go back to some good old chemistry lessons in school. See, crude is a mixture of hundreds of different molecules all jumbled together. The technique for separating them is called fractional distillation, and at its core, it works on a simple principle. Different molecules boil at different temperatures. So refineries heat crude oil in a furnace until it mostly vaporizes, and then they push that vapor into a tall steel tower called a distillation column that's hot at the bottom and progressively cooler at the top, much like how hilly areas work.

4:05As the vapor rises and cools, different molecules condense back into liquid at different heights, depending on their boiling points. Each layer that collects from top to bottom is called a fraction, and each of it becomes a different product. At the very top is LPG or liquefied petroleum gas, and that's what's used in your kitchen cylinder. These are the lightest molecules that condense only at very low temperatures. At normal temperature and pressure, LPG is a gas, and it only becomes liquid when compressed. That's why it can be stored in a metal cylinder. The next fraction is NAFTA, one of the most important industrial raw materials in the world. It goes into making plastics, synthetic fibers, fertilizers, and pharmaceuticals. Almost everything made of plastic has NAFTA somewhere in its origin story. Petrol or gasoline, which is the basic fuel for most passenger cars, comes after NAFTA. KeroCin sits below petrol, and its most important use is aviation fuel. Every commercial flyer runs on a high grade version of KeroCin.

5:05And then there's diesel, which is heavier than petrol and KeroCin. Trucks, buses, trains, and ships prefer diesel because it contains more energy per liter than petrol, making it better suited for heavy loads. Most of India's freight, for instance, moves on diesel. Lastly, at the very bottom of the column are the heaviest residues. One is fuel oil, which is used by large cargo ships and power plants, and ultimately there's bitumen, which is the black tar like substance used to pave roads. Knowing what we know now, it's clear we often underestimate how ever present oil is in the world. And we don't just mean in terms of vehicle fuel or kitchen use. Your nearest street road, plastic garbage bags, nylon clothes, toys, and even phone covers, all of these depend on some or the other fraction of crude oil. Perhaps that's why people still say that oil, and not data, is the new oil. Now crude oil isn't the only thing hiding underground. In many of the same reservoirs sitting above the oil layer, there's a gas. Since gas is usually lighter than liquid, it floats on top like air above water.

6:10And that's natural gas, and it's a separate thing from crude oil, even though the two are neighbours underground and often discovered together. Now natural gas mostly takes the form of methane. The simplest, lightest hydrocarbon molecule there is. But when it comes out of the ground, it's not pure methane. It arrives as a mixture of mostly methane mixed with heavier gases like propane, butane, and ethane. Before that gas can travel through a pipeline into your city, those heavier components have to be separated out. After all, city pipelines are only designed to carry methane, and the heavier stuff would condense into liquid inside the pipes and cause problems. Interestingly, the separated out propane and butane form LBG, the very same gas found in your kitchen cylinder. So LBG doesn't just come from refining crude oil, it also comes from cleaning up natural gas before it enters a pipeline. In fact, globally, more LBG is produced this way than from refineries. Once cleaned up, the methane travels through pipelines to power plants, factories, and homes.

7:11It heats buildings, generates electricity, and perhaps most critically feeds the world. The chemical process that makes nitrogen fertilizers, which in turn feed roughly half the global population, runs on natural gas. Disrupt natural gas supply, and you don't just turn off the lights, eventually you affect food production. You may have also heard of CNG and LNG and wondered how they're different. They're actually the same molecule, methane, just stored differently. So CNG or compressed natural gas is methane squeezed under very high pressure into a tank. It stays a gas, just a very densely packed one. It powers many auto rickshaws and buses. And LNG, or liquefied natural gas, is methane that's been treated to minus 162 degrees Celsius. Cold enough to turn into liquid and shrink to about 1-600th of its original volume. That makes it practical to load onto ships and transport across oceans to countries that don't have pipeline connections. Qatar, for instance, exports most of its natural gas as LNG and India imports it.

8:16Now India's position in this entire chain is tricky to say the least. India is the world's third largest oil consumer and we import more than 83% of every barrel it consumes. So to put that another way, India produces enough oil to cover only about six weeks of its own needs. The rest comes from ships, mostly from middle east, mostly passing through or around the street of hormones. India is not, however, helpless in the oil story. Despite its limited domestic production, we have built the world's fourth largest refining capacity. 258 million metric tons per year as of early 2025 spread across 23 refineries. In itself, reliance is jam-nugga complex in Gujarat. The largest refinery in the world can process around 1.4 million barrels a day at a single site. India imports crude, processes it and actually exports refined products like petrol, diesel, jet fuel to global markets. Which brings us back to this week.

9:16The street of hormones, the narrow choke point through which roughly 20% of the world's oil normally flows has effectively closed. India has scrambled to expand its crude sourcing from 27 countries to about 40. India holds roughly 100 million barrels of crude and petroleum product stockpiles in storage tanks, underground caverns and in ships currently at sea. That's enough for 40 to 45 days if Gulf flows don't resume. The IA, however, recommends 90 days as the minimum buffer, quite far from where we are. So the next time you see a headline about NAFTA prices or LPG shortages or country-stapping there reserves, you will know it's all the same story, playing out across different parts of the same supply chain. And it's a stark reminder of all the myriad daily use objects we use that fundamentally depend on rock formations from millions of years ago. We listened to a lot of con calls while researching our stories, so we started a newsletter called The Chatter. It's a curated collection of the sharpest management quotes for that week in a neat and readable

10:19format published every Friday. The link is in the description. Coming to the second story. So last month, Maruti Suzuki launched the Ivitara, its first electric car. From the outside, it's a sleek looking SUV with a 543-kilometer range and true to Maruti's promise to offer value for money, it's priced aggressively starting at Rs 10.99 lakh. The market noticed the low prices, but it also noticed the possibility that this price could squeeze Maruti's profitability, perhaps like no other car Maruti has ever made. Last financial year, Maruti posted an 11.7% a bitter margin beating the global auto industry average by a significant margin. Maruti has never really had to sell a car it couldn't make money on. The company has always followed its Japanese parent company Suzuki's manufacturing philosophy called Shoshou Ke Tam B, which prioritizes smaller lighter cars. If any company could figure out how to make an affordable EV profitably, you'd think

11:24it was Maruti. But EVs are a whole different field from what Maruti is used to. First, let's try to understand what made Maruti so dominant in the first place. Back in 2015, RS Kalsi, Maruti's then executive director for Saears had said, any model which the company has launched in India has 95% localization. This was what Maruti always did. Maruti built an entire ecosystem of vendors around its factories, 78% of their supplier base by value sits within 100 kilometers of its plants. For cars based on petrol engines, which have thousands of components like steering systems, brake pads, wiring harnesses, fuel injectors, seat fabrics and so on, such strong geographical clustering is extremely valuable to have. Every car can go from design to mass production extremely quickly. Each of those suppliers, meanwhile, would compete fiercely for Maruti's business. If one vendor won't meet the price, there was always another one waiting. And this created immense competition among vendors keeping costs low for the company.

12:26But EVs changed the game completely. See, EVs need far fewer mechanical parts. They have no engine, no multi-gear transmission, no exhaust system, no fuel injection. Many of the product clients that Indian suppliers built their businesses around simply don't exist in an EV. What replaces them is electronics, software and above all, the battery. A single part, which alone, makes up over 30% of an EVs cost. For its newest launch, the company introduced a battery as a service model or a bus. Under bars, the customer buys the car without the battery upfront and instead pays a per kilometer rental for battery usage. It's like separating the cost of fuel from the cost of the car. And this makes the sticker price look lower and eases the buyer into EV ownership. But it also splits the car into two visible prices. The EV etara without a battery, Rupees 10.99 lakh, the EV etara with a battery, Rupees 15.99 lakh. The battery alone costs Rupees 5 lakh for the base variant and Rupees 5.5 lakh for

13:27the larger 61 kilowatt-hour back. Now what does this mean for Marathi, which is known for its cost-cutting? In a petrol car, the entire powertrain, engine, gearbox, fuel system exhaust accounts for roughly 18% of the car's cost. But this flips completely in the case of EVs. Marathi imports the core finished battery from one single vendor, BYD, and its old playbook doesn't help it here. Meanwhile, Marathi has priced the car below every competitor to gain market share from those who are ahead in the EV race. For instance, the Mahindra BE6 costs Rupees 18.9 lakh. The Hyundai Kretta EV is at Rupees 18 lakh and the Tata curve EV at Rupees 18 lakh. These competitors have more control over their battery costs by virtue of having their own local battery pack assembly or stronger battery integration. While importing battery cells from Chinese suppliers, Goshen and EVE, Tata assembles finished packs of local plants in Pune and Sanand. Mahindra will build packs in India using Volkswagen's cells. While these players themselves are also fairly late to EVs, these moves still help them capture

14:32more of the value of an EV which Marathi is losing right now. And this makes the roads steep enough for Marathi already, but it gets harder. In September 2025, the government overhauled India's GST structure. Small petrol-based cars saw their GST drop from 28% to a flat 18%. On a Rupees 8 lakh hatchback, this meant savings of roughly Rupees 1.5 to 2 lakh for the buyer. Meanwhile, EVs didn't enjoy any such rate cut and stayed at 5% GST. Their price advantage had come down. So Marathi was juggling multiple things that hit its profitability at once. It was importing expensive batteries, it was pricing its cars aggressively to undercut rivals and the tax reform had just made petrol cars significantly cheaper. Meanwhile, its customer base still mostly treats EVs as a second vehicle. It's entering a very different business from selling Swift's at 12% margins. So how did Marathi end up here? Part of the answer is timing. The EVA Tata isn't just Marathi's first EV.

15:34But Suzuki's first mass-produced EV anywhere in the world. Back when the rest of the auto ecosystem had started shifting to electric vehicles, Suzuki bet on a different path. While Toyota was partnering with Panasonic on batteries, while Hyundai was pouring billions into SKE on and while Volkswagen was locking in long-term sales supply agreements, Marathi bet on hybrids and CNG. In the short term, this was a good idea. At least for the Indian market, that bet paid off handsomely. On the Q3 FY25 earnings call, Bharati noted that every one in three cars sold by the company in the domestic market was a CNG vehicle. Marathi offers 14 CNG models, the industry's most comprehensive lineup. But over that time, Marathi Suzuki, like many other car makers, didn't see a lot of reason to build an EV battery supply chain. And this caution wasn't irrational. Globally, the conviction that EVs would rapidly replace petrol cars has taken a beating. Toyota recorded $19.5 billion in charges to unwind its EV strategy, cancelled the F-150

16:35lightning and is pivoting to hybrids. GM took a $6 billion write down on EV investments. Even Toyota, which has the deepest EV partnerships of any Japanese automaker, slashed its 2026 global BEV production target by roughly a third. As CNBC put it, many have admitted that policies not consumers were driving the charge for EVs. In fact, Marathi's management themselves said, after the introduction of GSD 2.0, the penetration of EVs is going down. The EV industry is not keeping pace with the auto industry, about 99% of customers who buy an EV use it as a secondary car. It's not the primary car. So, there was another reason for why Marathi did not see a good reason to double down on EVs. China's dominance in the supply of lithium presents a huge risk to anyone in the battery business. Marathi's chairman, R.C. Bargava, even said that this is one of the reasons investors are not investing in battery sales manufacturing in India on a significant scale. In fact, in the first half of the year, Marathi reportedly cut EV tarar production from 26,500

17:39to just 8,200 units due to a global shortage of rare earth elements linked to China tightening export controls. So, to some degree, Marathi's rationale for not investing in EVs made sense. But this also meant that when the time came to build an EV, the company had no battery supply chain of its own. Now, Suzuki does have a battery operation in India in TDSG, a joint venture between Toshiba, Tenso and Suzuki, set up in 2017 right next to Marathi's Gujarat plant. It produces 18 million sales annually and has received Rs. 4,267 crore in investment. But there's a catch. TDSG makes batteries for mild and strong hybrid vehicles like Marathi's Grand Vitara model. It uses Toshiba cell chemistry which is designed for smaller packs, but the EV tarar uses far more powerful batteries, 49 and 61 kilowatt-hour battery packs, which the facility does not manufacture. They are much larger and require a different chemistry, hence they're imported from China instead.

18:40Now, there are other such teething problems that Marathi is currently facing in making such a shift. For instance, Marathi had reportedly hit bottlenecks in software development, which is a key part of EVs today. Evidently, to enter the EV business, you will need to go back to the drawing board often. On the Q3 FY25 earnings call, an analyst from Nubama asked Marathi's management when EV profitability per vehicle would match ICE cars, and the response was blunt. We have to be slightly realistic here. If the profit of an EV was equal to that of an ICE, why would the government support so much at the central level and the state level, so for a long time, it's not going to happen. Our effort is to minimize costs so that we are able to satisfy all stakeholders. Cost reduction is the way. In December 2025, Banerjee added, right now, we are importing the batteries, but yes, we have a plan for localization. It's very much on the cards in a faced manner over the next few years. Perhaps we'll see that plan unfold over time. The EV Tara is being manufactured exclusively at the Gujarat plant for over 100 countries,

19:43and that kind of concentrated global production, along with Marathi's omnipresent dealer and service network, gives them economies of scale that no Indian EV rival can match. It's why Marathi claims that it, as far as to be the largest manufacturer of EVs in India within the first year of start of production. Marathi Suzuki also understands how important having the capability to make their own batteries is. Suzuki announced Rs. 70,000 crore in India investment over 5 to 6 years, and its FY 2030 growth strategy commits 500 billion yen or Rs. 29,000 crore, specifically to batteries. Suzuki also acquired Candavia Corporation's solid state battery division. But for all intents and purposes, Marathi has a hard road ahead of itself if it wants to build strong EV capabilities. Building back the kind of cost control it enjoyed for petrol cars is Marathi's most important project right now. It's also its most uncertain one.

20:44Now coming to the tidbits, the US has launched a section 301 investigation into what it calls unfair trade practices by 16 major trading partners including India. The probe focuses on excess industrial capacity and could lead to new tariffs if violations are found. The move signals a tougher US trade stance amid rising global tensions. Coming to the next tidbit. That credit funds are rapidly expanding in global corporate lending, stepping into areas once dominated by banks. Companies are increasingly turning to these funds for larger loans as regulations and capital rules limit banks. The shift is reshaping credit markets with private lenders now handling bigger and riskier deals. Coming to the final tidbit. India's drug regulator has warned pharmaceutical companies against directly or indirectly advertising weight loss and anti obesity medicines. The quantity said such promotions violate drug advertising rules and can mislead customers. The warning comes as demand for new obesity drugs surges across the country. That's all the news I have for you. Thank you so much for watching and see you in the next one.