India is one of the most vulnerable to crude oil supply disruptions caused by the escalating Middle East crisis and the closure of the Strait of Hormuz. Analysts say that a prolonged closure would deplete the country’s stock, as it had already cut purchases from Russia due to US pressure.
New Delhi has far less oil in storage compared to China, which buys its crude from Iran.
Ajay Parmar, director of energy and refining at ICIS, a commodities research group. said “China has at least six months' worth of crude supplies in storage. Indian inventories are much lower, though, and so (it) is much more vulnerable in this situation”
As of January, about 55 per cent of India's crude exports came from the Middle East via the Strait of Hormuz. The country imported about 2.74 million barrels per day from the region, The highest since 2022.
The increase is due to recent pressure from Washington to reduce the intake of Russian oil over the war in Ukraine.
Oil Minister Hardeep Singh Puri told lawmakers last month that India can store enough crude and fuel to last about 74 days; however, refining sources told Reuters that India’s current inventories cover only about 20 to 25 days.
The Strait of Hormuz transports about a fifth of the global oil supply.
Iran has announced that it would not let any ship pass through the 33-kilometre-wide strait as Tehran’s tensions with the US escalated on Monday. Ships have come to a complete halt across the strait after five tankers were damaged and two personnel were killed.
About 150 ships lay stranded in the waters of the region.
Asian countries like China, India, Japan and South Korea are the at most risk from a disruption in the region.
However, Japan's reserves can cover 254 days of consumptions and South Korea's stockpiles can cover 208 days.
India, meanwhile, would be forced to seek alternatives in case of prolonged closure.
This could include increasing Russian oil imports again, as the US has not clarified its position on possible waivers for Russian oil tariffs for India. However, Russian supplies would take almost a month to arrive.
India could also look to get its crude oil from Venezuela, Brazil, West Africa and the US; however, this would increase the time.
An analyst with Kpler said that if India were to import crude from other parts of the world, it would create a spurt in prices and insurance costs.
Kpler analyst Sumit Ritolia told the media that crude oil dependency is the beginning and possibly the easiest to tackle. “The second involves natural gas, half of which comes from overseas in the form of liquefied natural gas, predominantly from the Gulf. The third, or the central prong, is LPG, nearly all of which comes from West Asia, which is used for cooking by most Indian households in urban centres.”
Krishnakumar, former chairman, Bharat Petroleum, told Business Standard. India would be able to overcome the crude oil crisis. “We are prepared and continuously look out for suitable sources, but will have to brace for supply and price challenges in the short term,’’ he said.
Matt Smith, an analyst with Kpler, said that Europe also could face challenges due to the interruption from the Strait of Hormuz. The Middle East accounts for around 45% of (Europe's) waterborne jet fuel imports," he said.
Reports say that about 750 ships, including 100 container ships have been caught in backups after Iran's closure of the Strait of Hormuz after its war with the US began. Jeremy Nixon, CEO of container carrier Ocean Network Express, known as ONE, said that about 10 per cent of the world's container ships could start piling up at ports and transshipment hubs in Europe and Asia. Maritime insurers have ceased transport of oil through the strait after Iran began retaliatory strikes against US and Israeli strikes.
