Is India most vulnerable to prolonged oil supply shocks in view of the ongoing tensions in the Middle East following the Israel-US attack on Iran and subsequent retaliation? Analysts say if the Middle East conflict causes a prolonged disruption in shipments from the region, India, a fast-growing oil consumer, is the country most sensitive to crude supply shocks, largely because of its low reserves.India is the world’s fastest growing major economy and a rapidly growing consumer of oil. Its vulnerability to supply shocks arises from its relatively small reserves and strategic oil reserves. This is especially low compared to its neighbor China, which has a six-month buffer in case of sustained disruption. About 90% of Middle Eastern oil exports are destined for Asia. Japan and South Korea are even more dependent on the region, obtaining approximately 95% and 70% of their oil, respectively.Read this also Oil prices increased! Will petrol, diesel rates increase in India if crude oil reaches near $80 due to Middle East tensions? However, both countries maintain much larger reserve buffers than India and China. Japan’s oil reserves are enough to cover about 254 days of consumption, while a South Korean government official said the country’s reserves could cover about 208 days of consumption.
india vs China’s oil reserves
Both India and China are large consumers of oil from the Middle East. In fact, about 50 percent of India’s crude oil imports go through the Strait of Hormuz. However, vulnerabilities vary due to differences in oil storage capacity, Reuters reports.After reducing the purchase of crude oil from Russia, India’s dependence on oil passing through the Middle East and the Strait of Hormuz has also increased in the last few months.
“China has at least six months’ worth of crude oil supplies in storage. Indian inventories, however, are much lower, and hence (it) is much more vulnerable in this situation,” Ajay Parmar, director of energy and refining at commodity research group ICIS, was quoted as saying by Reuters.The vulnerabilities facing these major Asian economies highlight the broader consequences of the Israeli and US attacks on Iran, which have escalated into a broader regional confrontation and closed the Strait of Hormuz. This narrow passage is a vital chokepoint, handling about a fifth of global oil shipments. Analysts have warned that a prolonged conflict could send fuel prices rising. As of January, India was importing about 2.74 million barrels per day from the Middle East, about 55% of its total crude oil purchases. The stake is the highest level since the end of 2022, after Indian refiners reduced their intake of Russian oil amid pressure from Washington.
Last month, Oil Minister Hardeep Singh Puri had said that India had enough crude oil and fuel reserves to meet demand for about 74 days. Supply disruptions on this scale could force India to diversify its sourcing. In a post on Twitter on Monday, the oil ministry said the government will take all necessary measures to maintain availability of fuel at reasonable prices.Read this also Risk of oil shock in Middle East: How dependent are China, India, Japan on Middle Eastern crude oil, gas?
wide global impact
Although Europe and the United States are not major direct importers of Middle Eastern crude, analysts warned that a prolonged blockage of flows through the Strait of Hormuz would still hit them through higher global prices.“If we see a prolonged war in which the strait remains out of use for a long period of time, it will mean all countries globally competing for every possible barrel of oil,” Parmar said.Matt Smith, an analyst at Kpler, said Europe may face difficulties securing jet fuel, as the Middle East’s Gulf supplies about 45% of Europe’s maritime jet fuel imports.In recent years, the United States has reduced its dependence on Middle Eastern oil as it has emerged as the world’s largest oil and gas producer. The country imported less than 900,000 barrels per day from the Gulf last year, according to US data. A US official said Washington is not currently considering release from the Strategic Petroleum Reserve, although previous administrations have considered it during periods of conflict.