NEW DELHI: India on Tuesday welcomed US president Donald Trump’s statement after assuming office to ramp up oil and gas production by the world’s largest economy, and “export American energy all over the world.”
“There is a possibility of more energy purchase between India and U.S.,” minister for petroleum and natural gas Hardeep Singh Puri said here. “More U.S. energy coming into the market is welcome.” He, however, added that in any case, there is no shortage of oil in the global market.
The US move comes at a time when the fresh sanctions have increased the chances of some tightening Russian oil supplies to India. In 2024, over a third of India’s oil imports were from Russia.
Trump, in his inaugural address as the 47th President of the US, laid a clear plan for the country’s energy sector – increasing domestic oil and gas production, declaring a national energy emergency, and withdrawing from the 2015 Paris climate deal.
The US is currently producing around 13 million barrels of oil per day and is likely to bring additional 1.4 million-1.5 million barrels a day into production in the short run.
“With Trump in power, India can count on continued oil and gas supply to ensure its developmental needs since the US is a net exporter of fuels now. Between 2017 and 2024, the US became the fifth-largest liquified natural gas (LNG) and crude oil supplier to India,” Arunabha Ghosh, CEO of the Council on Energy, Environment and Water had said earlier.
Xavier Tang, market analyst at Vortexa said that the mainstream US crude supplies to India will likely remain unaffected under Trump’s presidency, and US exports of oil to India would still be driven by economics. However, the potential imposition of 25% tariffs on imports from Canada and Mexico can make Canadian heavy crude economically unattractive to Indian refiners.
“Donald Trump has announced that he intends to impose 25% tariffs on imports from Canada and Mexico. This would greatly increase the cost of Canadian heavy crudes which are transported via pipeline into the US, of which, some are exported to India. With the new import tariffs, Canadian heavy crude will almost be economically unattractive to Indian refiners, as such, we could expect to see lower exports of these crudes from the US Gulf to India,” Tang said.
In December, India imported 44,633 barrels of oil per day from the US making for only 1% of its total imports. The imports declined as much as 78% from 207,223 bpd in November. Russia remained the top supplier last month with its imports accounting for 31% of India’s total crude oil imports.
After falling during the first Trump administration, production in Iran and Venezuela has recovered under former president Joe Biden, as the focus of sanctions has shifted to Russia, as per S&P Global Commodity Insights. The agency had noted that growing US crude production has posed a significant challenge for the Organisation of Petroleum Exporting Countries (OPEC+) in recent years, exerting downward pressure on prices, threatening the bloc’s market share and prompting massive output cuts.
With the latest US sanctions on Russia, Indian refiners have begun to diversify their crude sourcing from countries in the Middle East and Africa. The US, which is already the fifth largest supplier of oil to India, is likely to increase its exports to India.
Trump’s policies mark a clear turnaround from those of the Biden administration which pushed for transitioning away from fossil fuels towards clean energy. For India, which is the world’s third largest consumer of oil and imports 85% of its oil requirements, Trump’s announcements could mean increased supply of US crude oil with potential changes in oil pricing.
“America will be a manufacturing nation once again, and we have something that no other manufacturing nation will ever have: the largest amount of oil and gas of any country on Earth. And we are going to use it. We will bring prices down, fill our strategic reserves up again, right to the top, and export American energy all over the world,” Trump said.
US domestic production is projected to increase next year, as part of the new drilled and completed wells coming online, analysts say.
Trump noted that the inflation crisis in the US was caused by massive overspending and escalating energy prices and he intends to bring down the costs while declaring a ‘national energy emergency’.
“I will direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices. The inflation crisis was caused by massive overspending and escalating energy prices. And that is why today I will also declare a national energy emergency. We will drill, baby, drill,” Trump said.
Additionally, Trump’s focus on fracking and raising US oil & gas output should keep oil prices muted, which should benefit the Indian oil marketing companies and value chain users of crude oil and substitutes which have been under pressure lately owing to the higher crude oil prices.
As India’s oil demand and refining capacity is set to rise, refiners and policymakers are intensifying efforts to diversify the crude import basket to reduce overdependence on a few supplying countries or regions.
Source: The Financial Express