Why India may not feel the heat if Iran closes Strait of Hormuz
India is unlikely to feel the heat even if Iran decides to shut down the Strait of Hormuz, a narrow but vital oil choke point, following the US's air strikes on Iran's nuclear sites amid heightened tensions in the Middle East.According to industry officials and experts, India has diversified its sources of oil imports and alternative sources - from Russia to the US and Brazil - are readily available to fill any void in case the Strait of Hormuz shuts down.advertisementAs the military conflict between Iran and Israel escalates, the Iranian parliament has reportedly approved a measure to close the Strait of Hormuz, a major LNG export transit and where a fifth of the world's oil flows. India imports about 40 per cent of all its oil and about half of its gas through the narrow strait.WHY STRAIT OF HORMUZ IS SIGNIFICANT FOR INDIA?
The Strait of Hormuz, which lies between Iran to the north and Oman and the United Arab Emirates to the south, serves as the main route for oil exports from Saudi Arabia, Iran, Iraq, Kuwait, and the UAE. Many liquefied natural gas (LNG) shipments, especially from Qatar, also pass through the strait.India, the world's third-largest oil-importing and consuming nation, imports about 90 per cent of its crude oil, with over 40 per cent of those imports originating from Middle Eastern countries whose exports transit the Strait of Hormuz.advertisementIndia brings around 5.1 million barrels of crude oil abroad, which is converted into fuels like petrol and diesel in refineries.INDIA A BIG BUYER OF RUSSIAN OILAs the Middle East remains in strife, India has ramped up purchases of Russian oil in June, importing more than the combined volumes from Middle Eastern suppliers such as Saudi Arabia and Iraq, preliminary data by global trade analytics firm Kpler showed.India imported an estimated 2.1-2.2 million barrels per day (bpd) of Russian crude, maintaining Russia's share at over 35 per cent of India's total crude intake, a pattern seen for over two years.New Delhi, which has traditionally imported crude oil from the Middle East, began sourcing a large volume of oil from Russia after it invaded Ukraine in February 2022. This was because Russian oil was available at a significant discount to other international benchmarks due to Western sanctions and some European nations shying away.This led to India's imports of Russian oil seeing a dramatic rise, growing from less than 1 per cent of its total crude oil imports to a staggering 40-44 per cent in a short period.India's oil imports from Russia were 1.96 million bpd in May.advertisementImports from the United States also rose to 439,000 bpd in June, a big jump from 280,000 bpd purchased in the previous month. This signals a steady expansion in India's transatlantic trade links and a broader diversification of supply.OIL IMPORTS FROM MIDDLE EAST DIPFull-month projections for imports from the Middle East stand at around 2 million bpd, lower than the previous month's buying, according to Kpler.The conflict in the Middle East has so far not impacted oil supplies."While supplies remain unaffected so far, vessel activity suggests a decline in crude loadings from the Middle East in the coming days," Sumit Ritolia, Lead Research Analyst, Refining and Modeling at Kpler, told news agency PTI."Shipowners are hesitant to send empty tankers (ballasters) into the Gulf, with the number of such vessels dropping from 69 to just 40, and (Middle East and Gulf) MEG-bound signals from the Gulf of Oman halving."IMPACT ON INDIA AND ALTERNATIVE SOURCESThe heightened tensions in the world's largest energy supply basket would, however, have a near-term impact on prices, with oil prices likely to jump to USD 80 per barrel, analysts said.Russian oil is logistically detached from the Strait of Hormuz, flowing via the Suez Canal, Cape of Good Hope, or the Pacific Ocean. Even US, West African, and Latin American flows - though costlier - are increasingly viable backup options in case the Strait of Hormuz shuts down.advertisementOn gas, India's principal supplier, Qatar, does not use the Strait of Hormuz for supplies to India. India's other sources of liquefied natural gas (LNG) in Australia, Russia and the US would be untouched by any closure.India can also release oil from its strategic reserves (covering nine to 10 days of imports) to bridge any shortfall. It may also pivot harder towards the US, Nigeria, Angola, and Brazil for oil imports, albeit at higher freight costs.The government can also consider price subsidies to curb inflation if domestic prices spike, especially for diesel and LPG.In an interview with India Today TV, Union Petroleum Minister Hardeep Singh Puri allayed concerns about a spike in oil prices amid the Middle East conflict, saying the situation was manageable and energy rates were under control.(with inputs from PTI)Must Watch
IN THIS STORY#Israel#Iran#Middle East
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