India has been importing one million barrels of oil from Russia daily, and hence Russia has become the largest oil supplier to India. Let’s explore what this means for India.
What’s happening?
India imports 85% of its crude oil requirements, due to which it has today emerged as the world's third-largest oil consumer. After the Russia-Ukraine conflict, India continued buying crude oil from Russia at discounted prices amid international pressure. The result is such that Russia is now India’s largest oil supplier.
According to Vortexa, which monitors the consignment of energy, India’s crude oil import from Russia increased to one million barrels per day in December 2022. This is the third consecutive month when Russia remains the largest supplier to India. This is happening for the first time that crude oil imported from Russia has exceeded one million barrels per day.
Russia contributed only 0.2% of India's total crude oil imports until March 31, 2022. But in December, Russia supplied 11.9 lakh barrels of crude oil daily to India. Russia became India's major crude oil supplier for the first time in October 2022, overtaking traditional sellers such as Iraq and Saudi Arabia. Currently, Russia's share of India's total crude oil imports has increased to 25%.
Increase in imports after imposing price cap
According to a PTI report published in Zee Business, after the price cap on crude oil was imposed, there has been a tremendous increase in India's crude oil imports from Russia. The price cap was imposed at $60 per barrel on Russian oil, while India is importing oil at a cheaper price than the price cap.
According to the Vortexa report, India imported 8,03,228 barrels per day of crude oil from Iraq and 7,18,357 barrels per day from Saudi Arabia in December.
Importance of buying crude oil From Russia
India has been buying crude oil from Russia at a discount. From an economic point of view, cheap oil positively affects the economy.
How?
Crude oil bought at a cheaper price is refined at a cheaper price. Hence, it helps keep prices low. Moreover, we have to spend fewer dollars from our dollar deposits, which helps keep the current account deficit at bay.
$58 billion investment expected
India currently meets 85% of its crude oil requirements through imports. The government of India is constantly trying to reduce its dependence on imports. According to Petroleum and Natural Gas Minister Hardeep Singh Puri, in 2023, an investment of $58 billion is expected in the country's oil and gas exploration and production sectors. He said that global energy companies like Chevron Corp, ExxonMobil and TotalEnergies are looking to invest in India.
What’s next?
The Indian government is trying to reduce dependence on imports for crude oil, but it may take a long time. Till then, India will have to depend on imported crude oil. External Affairs Minister Subrahmanyam Jaishankar told the Rajya Sabha on December 7, 2022, that Indian refineries would continue to look for the best deal in the country’s interest.
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