Oil Prices Surge, But India Remains Resilient Against Potential Disruptions
Rising oil prices may not immediately spike consumer fuel costs in India, as officials state that the country’s diversified crude sourcing strategy offers a buffer against potential disruptions, particularly if the Strait of Hormuz is closed. India, the world’s third-largest crude consumer, has sufficient reserves to navigate short-term scarcities, though reliance on West Asia for a portion of imports remains a concern.
As rising international oil prices put pressure on many nations, Indian consumers may not feel the immediate impact on fuel prices, even if the Strait of Hormuz is closed by Iran. According to government officials, owing to India’s diversified sources for energy, the country is fairly insulated from potential disruptions. They stressed, however, that they would not disclose their names and further added that any refined petroleum product, should there be domestic shortages, could be restricted from export.
Recently, the price of the Indian basket of crude oil surged by approximately 19%, reaching $77.34 a barrel, up from just over $65 before the ongoing conflicts in the region. Despite this spike, officials pointed out that the average crude price in June stood at $69.78 per barrel, which remains a manageable level for the Indian economy. Notably, state-owned oil marketing companies (OMCs) have previously benefited from lower prices, suggesting that they may absorb increases in international prices up to $80 per barrel.
Officials highlighted India’s reduced reliance on oil from the Gulf region, sourcing crude from around 30 countries, including nations like Russia and those across South America and Africa. Still, about 40% of India’s crude imports do come from West Asia, which raises concerns since analysts caution that the closure of the strait could impact 40% of crude oil and between 50% and 60% of liquefied natural gas (LNG).
India is currently the third largest consumer of crude oil globally, importing 232.7 million tonnes valued at $157.5 billion in 2024-25. With over 88% of the crude it processes being imported, India also exports various refined products, strengthening its position as a regional refinery hub. In fiscal year 2025, the country exported approximately 61 million tonnes of petroleum products worth around $57.3 billion.
In case the Strait of Hormuz is indeed closed by Iran, one official suggested that shortages could potentially be addressed via export restrictions in the short term. However, a prolonged closure would undeniably create challenges. Focusing on cooking gas, another official mentioned that major state-owned companies, including ONGC and Indian Oil Corporation, are currently producing sufficient supplies to meet domestic needs.
Though the likelihood of Iran closing the strait seems low, as it would adversely impact its strongest ally, China, experts caution that such action could mainly affect South and Pacific nations like India, Japan, and the Philippines, which rely heavily on West Asian oil and LNG. SC Sharma, former officer on special duty at the Planning Commission, indicated that these countries are significant buyers of oil and LNG. Additionally, India has approximately 80 days’ worth of oil and various products stored, providing a buffer against short-term supply disruptions.
In conclusion, while the recent surge in international oil prices raises some concerns, Indian consumers may not feel an immediate impact, largely due to the country’s diversified energy sources. With several strategic measures in place, including sufficient oil stocks and the option to restrict exports, India appears better positioned than may have been previously anticipated in the event of regional supply disruptions. However, the potential fallout from a closure of the Strait of Hormuz should not be overlooked, particularly its implications for LNG imports.
Original Source: www.hindustantimes.com
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