Iran War: Due to increasing tensions in the Middle East and possible disruption in the transit route of the Strait of Hormuz, concerns about the supply of crude oil have increased. If the supply through this sea route is disrupted, a major disruption can be seen in the global energy market. In such a situation, the question is arising that what effect will this have on India? According to news agency Bhasha, India has about 40–45 days of crude oil reserves available to meet its needs. According to the estimates of energy market analysis firm Kpler, India has about 100 million barrels of commercial crude oil stock. This includes the reserves of refineries, underground Strategic Petroleum Reserve (SPR) and oil loaded in ships coming towards India.
India has enough reserves
India imports about 88 percent of its total crude oil requirement. More than half of total imports come from West Asia, much of which passes through the Strait of Hormuz. On an average, India imports about 50 lakh barrels of crude oil per day, out of which about 25 lakh barrels per day comes through this route. Sumit Ritolia, principal research analyst at Kpler, says that if oil supplies from West Asia stop temporarily, the immediate impact will be on the supply system and prices.
However, refineries generally maintain commercial reserves and the arrival of oil carriers that have already departed may provide short-term relief. But if the disruption lasts longer, pressure will increase due to import costs, transportation expenses and procurement from alternative sources. The price of global oil standard Brent crude has crossed $ 80 per barrel, which is about 10 percent more than the level before the Iran crisis.
Why is the Strait of Hormuz important?
India had spent $137 billion on crude oil imports in the last financial year. In the April to January period of the current financial year alone, $100.4 billion has been spent on the import of 206.3 million tonnes of crude oil. The Strait of Hormuz is an approximately 33 kilometer wide sea route, which connects the Persian Gulf to the Arabian Sea. About one-third of the world’s seaborne crude oil exports and about 20 percent of the global gas supply pass through this route.
Analysts believe that if needed, India can compensate for the shortage by taking additional supplies from West Africa, Latin America, America and Russia. According to experts, the biggest risk at present is more from price fluctuations and increase in the import bill than physical shortage. However, if the disruption remains severe and prolonged, it could lead to a significant increase in India’s oil import bill and broader economic pressures.
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