Amid rising tensions in the Middle East and concerns over potential disruptions to global oil supplies, India's Union Petroleum and Natural Gas Minister Hardeep Singh Puri has reassured the nation that its energy supply remains stable and secure, even in the face of a possible closure of the Strait of Hormuz. This assurance comes as Iran's Parliament recently approved a measure to potentially close the Strait of Hormuz, a critical chokepoint for global oil and gas transit, following recent US airstrikes on Iranian nuclear facilities.
The Strait of Hormuz, a narrow waterway between Iran and Oman, serves as a vital passage for approximately 20% of the world's oil and a third of its liquefied natural gas (LNG) shipments. Its closure could trigger significant disruptions in the global energy market, impacting prices and supply chains.
Puri, in a statement, emphasized that India has been closely monitoring the evolving geopolitical situation in the Middle East for the past couple of weeks. He highlighted the proactive measures taken by the Indian government, under the leadership of Prime Minister Narendra Modi, to diversify its oil import sources in recent years. This diversification strategy has significantly reduced India's reliance on the Strait of Hormuz for its energy needs.
The minister stated that a large volume of India's current oil supplies does not pass through the Strait of Hormuz. He also assured that Indian oil marketing companies possess several weeks' worth of oil reserves and continue to receive energy supplies from various routes, ensuring a buffer against potential disruptions. The government is committed to taking all necessary steps to maintain a stable fuel supply for its citizens.
Several industry experts and analysts echo Puri's confidence, noting India's improved position due to its diversified sourcing strategies. Alternative suppliers, including Russia, the United States, Brazil, and West Africa, are readily available to compensate for any potential shortfalls arising from a closure of the Strait of Hormuz. Notably, Russian oil, a major source for India, is logistically independent of the Strait, with transportation routes via the Suez Canal, the Cape of Good Hope, or the Pacific Ocean. Qatar, India's primary gas supplier, also utilizes alternative routes for LNG shipments, and other LNG sources in Australia, Russia, and the US would remain unaffected.
While the closure of the Strait of Hormuz could lead to a near-term increase in oil prices, potentially reaching $80 per barrel, experts believe India is well-prepared to manage these short-term fluctuations. The government may consider measures such as reducing excise duties on fuel if crude prices surpass $105 per barrel to mitigate the impact on consumers.
Despite the overall positive outlook, some analysts caution that prolonged closure of the Strait, exceeding a week, could trigger significant volatility in global markets, affecting India. They also note that while increased crude imports from Russia offer advantages, these are contingent on current price trends and discount margins.
The situation remains dynamic, with the final decision on closing the Strait of Hormuz resting with Iran's Supreme National Security Council. While the potential closure poses a threat to global oil supplies, India's diversified energy sourcing and strategic reserves provide a buffer, ensuring the nation's energy security amidst geopolitical tensions.
