Fuel prices can be a concern
The Middle East crisis is showing no signs of any decline. The further escalation of tensions has jolted global oil markets, sparking concerns over a possible fuel crisis in countries and regions that are mostly dependent on their oil supplies from the gulf region.
While crude prices have surged amid fears of supply disruptions through the Strait of Hormuz, officials in India say there is no immediate threat of a fuel shortage — though higher prices may be on the horizon.
The Strait of Hormuz, a narrow but strategic shipping route, carries nearly one-fifth of the world’s oil trade. Any prolonged disruption there could squeeze global supplies. For India, which imports close to 85–90 percent of its crude oil requirements, instability in the Gulf region directly impacts fuel economics.
Energy experts say India currently has sufficient reserves and diversified sourcing mechanisms to absorb short-term shocks. Oil marketing companies continue routine dispatches to depots across states and UT’s and there have been no reports of supply disruption so far.
However, sustained volatility in global crude markets could soon reflect at retail pumps. Market analysts indicate that if Brent crude remains elevated above the $90–$100 per barrel range for a prolonged period, oil marketing companies may revise pump prices upward to offset higher import costs.
Importantly, about half of India’s crude and LPG imports transit the Strait of Hormuz – the key energy chokepoint that has seen disruptions following US and Israeli attacks on Iranian government, military and nuclear facilities. Iran warned shipping away from the strait, and insurers withdrew coverage, effectively halting tanker movements.
While India has crude oil stocks to last 25 days and fuel to last a similar duration, contingency plans – including using stockpile in strategic petroleum reserves, commercial stocks, and diversified sourcing from the US, Russia, West Africa, and Latin America – will ensure continuity even if the crisis lasts longer.
While immediate shortages are unlikely, rising crude prices and higher freight and insurance costs could impact India’s import bill and inflation.
Notably, India is the third largest importer, fourth largest refiner, and fifth largest exporter of petroleum products globally.
While this year crude sourced from the countries that use the Strait of Hormuz is above 50 per cent due to a drop in Russian cargoes, the average over the past couple of years has been 40 per cent. The remaining 60 per cent is not shipped from the Strait.
Crude oil — the raw material that is turned into fuels like petrol and diesel in refineries — in storage tanks, pipelines and on ships in transit is enough to meet the country’s requirement for 25 days. Besides, there are stock of fuel in refineries, deposits, pipelines and other storage facilities that could meet demand for a similar duration. On top of this, there is crude oil stored in underground strategic reserves.
The country’s commercial crude oil stocks, including strategic petroleum reserves at Mangalore, Padur, and Visakhapatnam, total around 100 million barrels. This, along with additional refined product inventories, provides a substantial buffer against short-term disruptions.
Though India can tap suppliers in West Africa, Latin America and the US to make up for the shortfall from the Middle-East, it can also tap Russian oil to make up for the deficit. However, what matters is the price a common man may have to cough up to secure his fuel needs. This will be clear only in the coming few days.
