US Secretary of State Marco Rubio used his recent Delhi visit to press a familiar case. The United States wants to sell India more crude oil and liquefied natural gas, and it wants to do so on long horizons. The pitch arrives at a moment of real strain. India's merchandise trade deficit, on commerce ministry data, stood at $28.38 billion in April, swollen by an oil bill that has climbed since Iran shut the Strait of Hormuz in late February. Brent crude touched $138 a barrel that month before settling near $104, and the rupee has weakened to record territory, close to 96.9 to the dollar, as every imported barrel now costs more in domestic currency. For a country that buys roughly seven barrels in ten from abroad, the external account is where the crude shock is felt most sharply.
India has already responded by reworking where its oil comes from. In March, "Russian crude reached a record monthly 2.25 million barrels a day, according to industry tracking data, about half of total purchases, while Middle Eastern supply fell 61 per cent to roughly a quarter of the basket. That shift has kept dollars at home, but it has not been clean. For close to two years, payments for Russian oil left large rupee balances stranded in Indian banks because Moscow struggled to spend them, and refiners had to engineer workarounds before the problem eased. The lesson is worth carrying into any conversation with Washington. Cheap crude and smooth settlement rarely come in the same package, and a supplier that solves one problem can quietly create another.
Washington's frustration is easier to read against the trade ledger. The American goods deficit with India reached $58.2 billion in 2025, on US Trade Representative figures, more than a quarter higher than the year before, and buying American energy is one of the few quick ways to narrow it while building goodwill toward ‘Mission 500’, the $500 billion bilateral trade target both governments have set for 2030. The difficulty is that the offer runs into engineering. American crude is mostly light and sweet, while Indian refineries are built around heavier, sourer grades and tuned for high diesel output. Feeding them lighter crude lowers diesel yields, tightens that fuel and pushes its price up, and because diesel moves freight, the cost travels into food and goods across the economy. A shipping route of about 45 days from the US Gulf, against under a week from the Persian Gulf, adds a further premium that no amount of diplomatic warmth can shorten.
India is not bargaining from a position of comfort. Its dedicated strategic reserves cover only about 9.5 days of demand at full capacity, and nearer five at current filling, while total cover, including commercial stocks, sits around 60 days against a 74-day ceiling. Long-term contracts for the wrong grade of crude do nothing for either figure. A more useful diversification would lean on Latin American and Canadian heavy sour grades, which match Indian refineries and avoid the Hormuz chokepoint, and on wider rupee settlement with Gulf partners, whose large two-way trade with India lets those rupees be recycled rather than stranded. Neither route is free, since longer voyages thin the discount and Chinese buyers compete for the same cargoes. That is the spirit in which Rubio's offer should be weighed. It is a commercially priced product carrying a geopolitical premium, and pricing that premium honestly means counting the grade mismatch, the freight penalty and the lost diesel yield. New Delhi's task is to buy as much American energy as the economy genuinely needs, and no more than that to satisfy the relationship.
(Abishek Gupta and Monika Jain are researcher and associate professor of economics respectively at Birla Institute of Management Technology)
(The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.)
