Brent Crude Crosses USD 95, How Will Costlier Oil Affect India?

Mumbai: Brent crude has crossed USD 95 a barrel as renewed fighting in West Asia raises fears of supply disruptions. Prices have climbed about 20 percent from nearly USD 79 in early July, reversing the decline seen during a brief period of calm.

Crude traded between USD 88 and USD 97 over the past week after US strikes along Iran’s southern coast on 31 August and retaliatory attacks by Iran. The escalation has increased uncertainty over exports from the region.

Why India is vulnerable?

India imports nearly 90 percent of its crude oil requirement, making the economy highly sensitive to global prices. Its oil import bill was around USD 123 billion in FY26. Every USD 1 increase in crude prices sustained for a year could add about Rs 18,000 crore to the annual bill.

In the first four months of FY27, India imported crude worth USD 63.4 billion, up about 56.5 percent from a year earlier. Higher costs could fuel inflation, weaken growth and widen the current account deficit if passed on to consumers.

Supply routes under pressure

West Asia traditionally supplied 60-65 percent of India’s crude imports. The closure of the Strait of Hormuz, a route that earlier carried about 20 percent of global oil trade, has sharply reduced these flows.

Indian refiners have diversified towards Russia, the US and Venezuela. Supplies remain available, but longer shipping routes and the heavier nature of some crude grades increase processing and transport costs.

Demand continues to grow

India’s petrol consumption rose 7.88 percent year-on-year to 3.82 million tonnes in August, while diesel demand increased 6.46 percent to 7 million tonnes. Rising consumption will further lift import requirements.

Energy security push

India now sources oil from about 41 countries and is seeking more suppliers. The Rs 84,000-crore Samudra Manthan offshore exploration scheme also aims to increase domestic production. India’s eastern and western offshore basins are estimated to hold more than 5,600 million metric tonnes of oil-equivalent hydrocarbon potential.