Construction and infrastructure and Crude oil
Road building runs on two crude oil products, bitumen for the surface and diesel for the machines, so crude price shocks raise highway costs; India now shares that risk with contractors through escalation compensation.
Construction and infrastructure (industry) and Crude oil (energy): 3 relationships.
How they are linked
1. Diesel and bitumen
Physical flow · Strong · Crude oil → construction and infrastructure
Earthmoving, paving and haulage machines run on diesel, and roads are surfaced and resurfaced with bitumen, both made from crude; the site rates crude 4 of 5 on criticality for construction equipment makers and rental firms.
- 4 of 5 criticality for construction equipment makers and rental firms (diesel)
- 3 of 5 criticality for concessionaires, InvITs and O&M operators (bitumen for resurfacing)
Exposure is highest for contractors and equipment fleets that buy diesel daily. Road operators are exposed mainly through periodic resurfacing.
Enterprise types that depend on it:
- Construction equipment makers and rental firms: diesel fuel (criticality 4 of 5)
- Concessionaires, InvITs and O&M operators: bitumen for resurfacing (criticality 3 of 5)
Sources: Material Insights
2. Bitumen for roads
Physical flow · Strong · Crude oil → bitumen → road surfaces
Bitumen is a refinery product of crude oil and the binder in asphalt roads, so its volume tracks road-building activity and its price follows crude.
- 8.74 Mt India's bitumen consumption, 2025 (preliminary)
- 5.2 Mt and 2.8 Mt India's domestic bitumen production and imports, 2024
- about one third share of India's bitumen use met by imports, 2024
Consumption rose about 4% in 2025 on central government highway projects but stayed below the 2023 record of about 8.8 Mt; national elections and delays in state project payments had slowed work in 2024, and some state payment delays persisted in 2025. Domestic bitumen output is not expected to rise much, so extra demand is met by imports.
Sources: Argus Media (oil ministry data); Argus Media (oil ministry data)
3. Escalation compensation
Cost and price · High in India · Bitumen and diesel prices → highway contract costs
Fixed-price road contracts leave contractors exposed to oil product prices, so the road ministry compensates them for part of the rise in bitumen and diesel costs, moving the risk to the public budget.
- 31 December 2026 end date of the extended bitumen and diesel cost compensation for national highway projects
The road ministry extended the mechanism because bitumen prices kept rising and retail and bulk diesel rates diverged during the 2026 West Asia crisis. It covers EPC, hybrid annuity and performance-based maintenance contracts bid before 1 April 2026.
Sources: Construction World
For investors
Key learnings
- Road contractors carry crude price risk through diesel and bitumen, which can squeeze fixed-price contract margins.
- In India, escalation compensation shifts part of that risk to the government, so contract terms matter as much as the oil price.
- Bitumen demand follows highway activity: India used 8.74 Mt in 2025, still below the 2023 record, with about a third of 2024 use imported.
What to track
- Bitumen price revisions by state refiners: Changes road contractors' material costs (Fortnightly · IOCL, BPCL, HPCL)
- Bulk versus retail diesel price: A wider gap changes fleet fuel costs for contractors (Monthly · PPAC, oil marketing companies)
- Bitumen consumption and imports: Shows highway construction pace (Monthly · PPAC)
For policymakers
Key learnings
- Escalation compensation protects project execution in oil shocks but turns crude price risk into a fiscal cost for the road ministry.
- About a third of India's bitumen use was imported in 2024, so road programmes depend on refinery output and imports.
- Delays in state project payments held back bitumen demand in 2024 and 2025, showing that funding flow, not only the oil price, sets road activity.
What to track
- Escalation compensation paid on highway contracts: Measures fiscal exposure to oil prices (As issued · MoRTH, NHAI)
- Highway construction pace: Drives bitumen and diesel demand (Monthly · MoRTH)
India
India used about 8.74 Mt of bitumen in 2025, about a third of it imported in 2024, and the road ministry is compensating highway contractors for higher bitumen and diesel costs through 31 December 2026.
Sources
- Construction and infrastructure: materials, Material Insights (2026)
- India's bitumen consumption growth slows in 2025, Argus Media (oil ministry data) (2026)
- India's bitumen imports, consumption slip in 2024, Argus Media (oil ministry data) (2025)
- Government extends highway cost relief for bitumen and diesel to December, Construction World (2026)