India’s Energy Security Amid Conflicts

UPSC Syllabus: Gs Paper 3- Indian economy and Infrastructure

Introduction

The conflicts in West Asia and Ukraine exposed India’s deep vulnerability to global energy disruptions. Rising crude oil prices, sanctions, shipping risks, and supply-chain disruptions quickly affected inflation, growth, industrial costs, and fuel supplies in India. The crisis showed that energy security is no longer limited to securing cheap fuel. It now depends on diversified suppliers, secure maritime routes, strategic reserves, resilient infrastructure, stable supply chains, and reduced vulnerability to imported energy and critical minerals.

Breakdown of the Old Global Energy Order

1. Russia-Ukraine war exposed energy dependence: The Russia-Ukraine war revealed the dangers of excessive dependence on a single supplier. Europe reduced Russian gas dependence from 45% to 12% by 2025 after facing major supply disruptions.
2. Shift from efficiency to energy insurance: European countries reduced gas consumption by 20% between 2021 and 2024 and accepted spare LNG capacity despite low utilisation. Energy security became more important than market efficiency.
3. Strait of Hormuz became a major chokepoint: The West Asia conflict exposed dependence on maritime energy routes. Around 25% to 34% of global crude oil passes through the Strait of Hormuz, making it central to global oil supply stability.
4. Countries adopted different security strategies: China secured nearly 25 million metric tons of LNG annually through long-term contracts. Japan stockpiled 470 million barrels, equal to 254 days of consumption, while South Korea secured 273 million barrels through alternative routes.
5. Global oil demand patterns changed: The IEA (International Energy Agency) forecasts a decline of 80 kb/d in global oil demand in 2026. In contrast, non-OECD (Organisation for Economic Co-operation and Development) demand may still rise by 152 kb/d, increasing the strategic importance of India’s energy demand.

India’s Emerging Strategic Advantage

1. India became a major oil demand centre: India is now the world’s third-largest oil consumer. OPEC (Organization of the Petroleum Exporting Countries) projects India’s oil demand at 5.74 mb/d in 2025 and 5.99 mb/d in 2026.
2. India gained importance over China: The IEA projects Indian crude demand growth at 130 kb/d, compared with 80 kb/d for China. Slower Chinese demand growth increased India’s importance in global oil markets.
3. Diversification improved flexibility: Before 2022, Russia supplied only 2% of India’s crude imports. By FY2024-25, Russia’s share increased to nearly 36%, making it India’s largest supplier.
4. Multiple suppliers reduced immediate risks: India diversified imports across Russia, Iraq, Saudi Arabia, UAE, and the United States. This reduced dependence on any single supplier during disruptions.
5. Tactical responses supported short-term stability: Indian refiners purchased stranded Russian crude after temporary U.S. waivers. India also tied up crude supplies for nearly 60 days during the Hormuz crisis to avoid shortages.

Structural Vulnerabilities in India’s Energy Security

1. High import dependence and Hormuz exposure: India imports around 85–90% of its crude oil needs, while nearly 40–45% imports transit through the Strait of Hormuz. This exposes India to geopolitical tensions and global oil price shocks.
2. Exposure to economic instability: Rising crude prices increased import bills, inflation, industrial costs, and pressure on the rupee. India’s growth is projected to slow from 7.4% in FY26 to 6.5% in FY27, while inflation may rise from 2.3% to 4.4%.
3. Refinery configuration constraints: Indian refineries mainly process medium-to-heavy sour crude oil. Diversification towards light crude from regions like the U.S. and Latin America requires refinery modification and infrastructure investment.
4. Geographical and freight constraints: Alternative suppliers outside West Asia involve longer shipping routes and higher freight costs. Oil shipments from West Asia take nearly 7–14 days, while supplies from the United States may take 30–45 days.
5. Vulnerability of maritime supply routes: Gulf tensions in 2026 forced Indian LPG carriers to operate under naval escort during Operation Sankalp, exposing the risks in maritime energy transportation.
6. Limited strategic petroleum reserves: India’s reserves at Mangalore, Padur, and Visakhapatnam can support demand for nearly eight weeks during complete disruption. Reserve capacity remains lower than China, Japan, and South Korea.
7. LPG supply vulnerability: India imports nearly 60% of its LPG requirements, while around 90%of LPG supplies normally move through the Strait of Hormuz. Global disruptions increased panic booking and pressure on domestic supply systems.
8. Dependence on critical minerals: India’s transition towards EVs, batteries, solar power, and storage systems may reduce oil dependence, but it may increase dependence on lithium, cobalt, nickel, copper, and rare earths.
9. China-centric mineral processing risks: China controls over 91% of global rare-earth production, while India processes less than 5% of its projected 2035 battery-grade mineral requirements domestically. This creates a new strategic vulnerability in clean energy supply chains.
10. Dependence on external energy networks: India’s energy security remains linked to global supply chains, sanctions, shipping routes, and geopolitical rivalries. U.S. sanctions on Russian oil companies exposed the limits of tactical diversification.

Geopolitical and Economic Implications

1. Macroeconomic stability faced pressure: The crisis increased import bills, weakened the rupee, and raised industrial input costs. MSMEs dependent on natural gas were also affected by rising fuel prices.
2. Sanctions complicated India’s strategy: U.S. sanctions reduced Russian crude flows in late 2025. India had to balance energy security with geopolitical pressure from Western countries.
3. Higher freight costs increased import burden: Imports from Latin America and the United States increased transport costs and delivery time compared to Gulf suppliers.
4. Gulf exporters regained bargaining power: Spare production capacity increased the bargaining power of Gulf producers. Countries dependent on Gulf energy became more vulnerable to political instability.

Government Initiatives

1. Fuel supply remained stable: India sourced crude oil from more than 40 countries, with nearly 70% imports now coming through routes outside the Strait of Hormuz. Refineries operated at high capacity, sometimes above 100% utilisation.
2. LPG supply management improved: The government issued an LPG Control Order to maximise production. Domestic LPG production increased by 28% within five days, while over 50 lakh cylinders continued to be delivered daily.
3. Maritime monitoring was strengthened: A 24-hour control room was established to monitor vessels and support seafarers. Ports were instructed to prioritise LPG vessels and improve coordination with customs authorities.
4. Fiscal and diplomatic responses were used: The government adopted diplomatic efforts to stabilise supplies and used fiscal measures such as excise duty cuts to reduce retail fuel pressure.

Way Forward

1. Expand strategic petroleum reserves: India needs larger onshore and offshore storage capacity to handle prolonged disruptions. Expanding reserves can improve emergency response capacity during crises.
2. Accelerate domestic oil and gas exploration: Greater investment in offshore and onshore exploration is necessary to reduce excessive import dependence and improve long-term supply stability.
3. Diversify import sources and supply routes: India should continue diversifying imports beyond the Gulf towards the United States, Latin America, and Africa while balancing freight costs and refinery compatibility.
4. Strengthen maritime security and logistics: Stronger naval coordination, protected shipping routes, port preparedness, and real-time maritime monitoring are necessary to ensure uninterrupted energy supplies.
5. Upgrade refinery infrastructure: Indian refineries need infrastructure upgrades to process different crude grades efficiently. Greater flexibility can improve India’s ability to shift suppliers during disruptions.
6. Reduce oil intensity in transport and industry: Greater electrification in transport, industries, and households can reduce dependence on imported hydrocarbons and improve energy resilience.
7. Accelerate renewable energy transition: India needs faster expansion of renewable energy, battery storage, biofuel blending, and clean energy technologies to reduce long-term fossil fuel dependence.
8. Build secure critical mineral supply chains: India must strengthen domestic processing capacity for lithium, cobalt, nickel, copper, and rare earths because China dominates global rare-earth production.
9. Encourage private and international participation: Greater participation of private companies and foreign partners in strategic reserves and energy infrastructure can improve investment, technology access, and storage expansion.
10. Develop a long-term energy security framework: India requires stable supply contracts, resilient supply chains, regional energy partnerships, and coordinated policy planning instead of short-term crisis management.

Conclusion

India managed recent energy shocks through diversification, emergency planning, and tactical flexibility. However, high import dependence, limited reserves, vulnerable maritime routes, refinery constraints, and critical mineral dependence continue to create serious structural risks. India now needs a long-term energy security framework based on stronger reserves, domestic exploration, secure maritime networks, diversified supply chains, refinery flexibility, renewable energy expansion, and resilient critical mineral systems to reduce the economic impact of future geopolitical disruptions.

Question for practice:

Examine how recent geopolitical conflicts have exposed India’s energy security vulnerabilities and assess the measures needed to build a resilient long-term energy security framework.

Source: The Hindu