Context: The ongoing conflict in West Asia has highlighted India’s extreme vulnerability to geopolitical shocks, with Brent crude prices hitting $109.03 per barrel.
- This volatility is projected to slow India’s economic growth from 7.4% in FY26 to 6.5% in FY27 while nearly doubling inflation due to energy supply chain disruptions.
About India’s Energy Security Amid Conflicts:
What is Energy Security?
- Energy security is no longer defined simply by purchasing fuel at the lowest price; it now encompasses resilience, diversification, and the protection of macroeconomic stability. It involves a country’s ability to maintain a steady supply of energy resources at an affordable price while being capable of withstanding sudden geopolitical or economic shocks.
Key Data & Statistics on India’s Energy Security:
- Import Dependency: India currently imports over 85% of its crude oil needs, with dependency reaching 89.4% in FY2024-25.
- Chokepoint Vulnerability: Approximately 45% of India’s crude imports transit through the Strait of Hormuz, a critical global chokepoint.
- Rising Consumption: India is the world’s third-largest oil consumer, with demand projected to reach 5.99 million barrels per day (mb/d) by 2026.
- Supply Shift: Russia has become India’s largest supplier, accounting for 36% of imports in FY2024-25, up from just 2% prior to 2022.
Current Status of Indian Energy Security:
- High Tactical Flexibility: India has successfully diversified its import basket to include Russia, Iraq, Saudi Arabia, the UAE, and the U.S..
Example: India shifted from 2% Russian oil imports to 36% in just two years to leverage discounted prices during the Ukraine conflict.
- Persistent Structural Risks: Domestic crude production remains low, with only 28.7 million metric tons produced in FY2024-25 against soaring demand.
Example: This low output forces continued reliance on international markets, making the economy sensitive to currency and freight rate fluctuations.
- New Transition Vulnerabilities: The shift to green energy (EVs and solar) is creating a new dependency on critical minerals like lithium and cobalt.
Example: India currently processes less than 5% of its 2035 battery-grade mineral requirements, relying on China for processed rare earths.
Conflicts Disrupting Global Energy Security
- Russia-Ukraine War: This conflict exposed the dangers of pipeline-based energy dependence, particularly for gas supplies.
Example: Europe was forced to slash its reliance on Russian gas from 45% to 12% by 2025, prioritizing security over cost.
- West Asia Conflict: Demonstrated the fragility of sea-based transportation and the strategic power of maritime chokepoints.
Example: Tensions in the Strait of Hormuz, which carries 25% of the world’s oil, rapidly transmit price shocks across global markets.
- Maritime Threats in 2026: Heightened tensions in Gulf sea lanes have necessitated military intervention to protect commercial energy assets.
Example: Indian LPG carriers required naval escorts under Operation Sankalp to secure 97,000 metric tonnes of cargo.
- Fragmented Global Markets: Major powers are adapting by aggressive stockpiling and locking in long-term contracts.
Example: Japan has stockpiled 470 million barrels of oil, enough to cover 254 days of national consumption.
Implications of Energy Security Due to Conflicts:
- Macroeconomic Instability: High oil prices directly fuel domestic inflation and slow industrial growth.
Example: India’s inflation is projected to rise from 2.3% to 4.4% in FY27 due to current energy disruptions.
- Strategic Chokepoint Risks: Reliance on specific geographic routes can paralyze supply chains during regional escalations.
Example: With 45% of imports passing through the Strait of Hormuz, any closure there would be real and immediate for India.
- Shift in Bargaining Power: Spare capacity in Gulf nations allows exporters to regain pricing power as global demand fluctuates.
Example: Middle Eastern demand is falling, but their role as swing producers remains vital for high-import nations like India.
- Resource Weaponization: Conflict-driven shifts in mineral processing networks could hinder the global green transition.
Example: China’s control over 91% of rare-earth production poses a long-term risk to India’s solar and battery goals.
Way Ahead:
- Increase Strategic Reserves: Expand larger national oil and gas stockpiles to provide a buffer against short-term supply cuts.
- Enhance Maritime Resilience: Strengthen naval protection for sea lanes and chokepoints to ensure uninterrupted transit.
- Reduce Oil Intensity: Accelerate the transition in the transport sector to lower the overall demand for imported crude.
- Secure Critical Mineral Chains: Develop domestic processing capabilities for lithium and rare earths to avoid new dependencies.
- Leverage Optionality: Maintain a diverse import basket to switch suppliers quickly based on geopolitical developments.
Conclusion:
While India has shown agility in navigating recent energy shocks through tactical supplier shifts, long-term security remains elusive due to 89% import dependency. The path forward requires moving beyond optionality to structural resilience through strategic reserves and domestic mineral processing. Ultimately, India must lower the economic cost of future crises by reducing its overall oil intensity and securing maritime trade routes.
