By Subrata Majumder
With the outbreak of combined USA-Israel war against Iran, threats loomed large on oil price hike. It turns double whammy, combined with Trump’s tariff war. It raised a new era of global political and economic conflict, which is unlikely to decelerate in near future.
This war does not connote bilateral conflicts only. With Iran retaliating on American bases in Middle East countries and restricting the Strait of Hormuz for movement of oil and LNG cargoes, oil and gas shortages hover over the whole world widely.
Oil prices surged to US$ 90 to 110 per barrel from US$ 70 per barrel within a week. It is first time that oil prices rose above US$100 per barrel since Russia-Ukraine war in 2022.
For India, oil is the second biggest energy source. Unfortunately, unlike other major sources of energy (coal, hydro), oil energy depends largely on imports. Nearly 90 percent of oil requirement is met by import.
None the less, the state of oil import dependency in India is different from other countries. Unlike other major importing nations, oil import dependency of India does not lead major impact on economic parameters, like manufacturing, trade balances, current account deficit in the country.
There are two reasons which accrue cushion to the global price hike and current account deficit. First, India diversified oil imports largely from Russia, which offered discounted price (US$ 10 to US$ 13 per barrel for Brent crude), owing to EU and USA sanctions and second, a big sum of imports is offset by exports of oil refinery products of the country. Nearly 35 percent of imports of crude oil and petroleum products was offset by exports of oil refinery products in 2024-25.
With the outbreak of Russian-Ukraine war, followed by sanctions on Russian oil, global landscape of oil imports underwent dramatic changes. It gave a new lease of life to oil hungry nations to shift oil imports from Arab nations and diversify imports from other nations. Imports by world bigger importers, like China and India, are the cases in point.
Both China and India diversified oil imports from Arab nations to Russia. Eventually, Russia emerged the biggest supplier of crude oil to India. It accounted for 35.8 percent of India’s total import of crude oil in 2024-25, against 4.3 percent in 2021-22 (prior to the outbreak of Russia-Ukraine war). This left India with a big success in overriding the oil price gambling by the Arab world and OPEC.
However, the current major problem of oil and gas supply, due to USA-Israel combined war against Iran, relies more on the blockage of Strait of Hormuz. It is the world’s critical chokepoint for movement of oil and gas. It is stretching over 21 miles wide artery, giving 100 vessels move with oil and LNG daily. Nearly, 20-25 percent of global oil and gas (LNG) are transported through Strait of Hormuz. Hitherto, in any oil war or conflict Hormuz strait was never closed.
It is equally important for India to import oil and LNG. India imports nearly 50 percent of oil and LNG through this Hormuz strait. Eventually, currently larger shares of crude oil imports from Saudi Arab, Iraq and UAE and LNG from Quarter and UAE are affected by the blockage of this strait.
However, Iran clarified that Hormuz strait is closed only for vessels, associated with USA, Israel and their allies. Hence, Indian vessels are exempted from the blockage of the Hormuz strait. Even then, threats loom large due to ongoing war.
Eventually, despite exemptions given to India, blockage of Hormuz strait caused disruption of oil and LNG supply to India. A large number of cargo ships are staked in the strait under the surveillance of Iran and caused congestion. Larger metros in India, like Bangalore and Mumbai, have undergone critical shortage of LNG, leading to closing down of several restaurants and hotels.
With mere chances for the war to recede in near days, the situation is likely to be volatile. To this end, the only recourse to override the oil and gas shortages in the country is rationing of domestic supply and diversifying imports.
According to reports, India is diversifying oil imports from non-Arab countries. In between two months period of December, 25 and January 26, which were engulfed by Trump’s threat of war, India’s import of crude oil surged from non-Arab nations, like Angola (by 142.7 percent), Colombia (by 116.3 percent)m and Nigeria (by 78.7 percent).
Nevertheless, there is a congenial factor in favour of India’s energy consumption pattern. Unlike most oil based energy consuming nations, oil based energy is largely used for transportation and cooking gas in India. It’s whole gamut of energy supply in India is largely supported by coal (65 to 70 percent) and hydro (9 to 10 percent). Oil supports 30 percent only of total energy consumption.
Given these, India is placed in a favourable situation than others, amid the global oil crisis. (IPA Service)
Trump Is Continuously Giving Misleading Picture On Hormuz Strait Creating Confusion 