India insulates itself from oil shocks

(MENAFN) India is making strategic moves to protect itself from global oil market volatility, with crude imports from the US reaching a 27-month high in April 2025. This shift toward dependable suppliers comes amid sanctions on Venezuela and Iran. Meanwhile, Russia remains a crucial energy partner for India, offering deeply discounted crude under long-term agreements. In April, India’s oil imports from Russia reached near two-year highs, with Russia accounting for 40% of India’s crude market, followed by Iraq and Saudi Arabia.

India imports over 88% of its oil, making its economy extremely vulnerable to global price swings. A mere $1 increase in crude prices adds roughly $1.5 billion to the country’s import bill, straining the current account and complicating inflation control. Despite a drop in retail inflation to 3.61% in February 2025, energy prices continue to pose a significant risk to economic stability.

This exposure is especially concerning given India’s rapid growth path. The World Bank forecasts GDP growth of 6.7% for 2026 and 2027, but fluctuating oil prices could derail fiscal discipline, weaken the rupee, and drain foreign reserves. As the world’s third-largest oil consumer, India’s projected 3.2% increase in crude demand in 2025—nearly double China’s 1.7%—is driven by its manufacturing ambitions under initiatives like "Make in India."

India’s push for industrial growth intensifies its exposure to oil market shocks. Therefore, ensuring energy stability has become a strategic priority, calling for a diversified and sovereign-focused energy policy.

In April 2025, Brent crude prices ranged from $62–68 per barrel and WTI from $59–64, reflecting a fragile equilibrium between improving supply and uneven global demand. Contributing to this instability are US tariffs on steel, aluminum, and other imports, which raise production costs and discourage investment in American oil sectors. Global bodies like the IEA and OPEC warn these tariffs could trigger a “tariff-induced stagflation,” slowing global growth and straining energy-dependent economies like India.

Despite WTI and Brent dropping 15% and 14% respectively in 2025 due to higher OPEC+ output and trade-related uncertainties, India views the price dip as a short-term benefit rather than a solution. The volatility reinforces the need for diversified sourcing, stronger procurement strategies, and long-term energy independence.

To help stabilize prices amid uncertain demand, OPEC+ has begun a phased production increase of 2.2 million barrels per day as of April, with flexibility to adapt. This measured approach reflects efforts to manage supply without derailing economic recovery.

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