India maintains sufficient oil stocks amid Middle East tensions, seeks alternatives

Amidst escalating geopolitical tensions in the Middle East and disruptions at the critical Strait of Hormuz, India has asserted that it possesses sufficient crude oil and fuel reserves to navigate potential short-term supply shocks. While official statements, including those from Petroleum Minister Hardeep Singh Puri, emphasize India's preparedness and robust energy security, the exact duration of these reserves has been reported with some variation. Some government sources indicate around 8 weeks of combined crude oil and petroleum products inventory, while other reports specify approximately 25 days of crude oil stock and an additional 25 days of refined products like petrol and diesel. These figures include strategic reserves, which comprise about 9.5 days of crude oil needs on their own, with total national capacity reaching around 74 days when refinery stocks are included. The situation has been exacerbated by the conflict involving Iran, Israel, and the United States, leading to concerns about the security of shipments through the Strait of Hormuz, a vital chokepoint for global oil trade. Approximately half of India's crude oil imports, or about 2.5-2.7 million barrels per day, transit through this narrow waterway. Any prolonged disruption to this route could significantly impact India's economy, with experts predicting a potential reduction in GDP growth by 0.5 percentage points if the Strait were closed. The immediate effects are expected to be logistical and price-driven, with a sharp rise in global crude oil prices potentially impacting India's import bill and fueling inflation. Brent crude prices have already seen an increase, surpassing $79 per barrel. In response to these evolving dynamics, India is actively pursuing a strategy of diversifying its energy sources and seeking alternative import routes. The country currently imports crude oil from as many as 41 countries, a deliberate move to reduce dependence on any single region. This diversification strategy includes exploring supplies from countries in West Africa, Latin America, and the US, and potentially increasing purchases from Russia, which has offered energy supply support to India amid the crisis. India's reliance on Middle Eastern crude, while still significant, has decreased from over 60% to around 40-45% in recent years. Despite the heightened tensions and potential supply disruptions, the Indian government has assured that there are no immediate plans to increase petrol and diesel prices. Petroleum Minister Hardeep Singh Puri has consistently reiterated India's preparedness and the government's commitment to ensuring the availability and affordability of energy for its citizens, guided by the principle of an "energy trilemma" of availability, affordability, and sustainability. The Ministry of Petroleum and Natural Gas is continuously monitoring the situation through a 24/7 control room to ensure uninterrupted supplies. The broader implications for India's economy include potential impacts on its current account deficit and inflation, especially if disruptions are prolonged. However, the government's focus on diversification, coupled with existing inventory buffers, aims to mitigate these risks. The situation highlights India's strategic imperative to enhance its energy resilience in the face of increasing geopolitical volatility in critical energy supply regions.

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