Global sourcing strategy: Spot vs Term purchase of crude oil

Abstract

The major oil refining and marketing firms in India are IOCL, BPCL and HPCL. These firms are involved in crude procurement, refining, sales and distribution of the finished products. Basis the refinery configuration and demand forecast of finished products like MS, HSD, SKO, ATF, FO etc. the firm decides on the amount of crude procurement and the timeline for the same. Crude oil being the sole major raw material of the petroleum industry is a major part of the costs of these firms. Major factors considered for crude procurement through import are refinery production plans, demand forecast, domestic availability of the oil and inventory on hand.