India Diversifies Oil Imports to Counter Middle East War Shocks

The Government of India is implementing a broad energy diversification strategy to reduce reliance on Middle Eastern crude oil following supply shocks and price spikes caused by the Iran war. State oil refiners, including Indian Oil Corp, Bharat Petroleum, and Hindustan Petroleum, are trimming long-term contracts with Middle Eastern producers in favor of spot-market purchases and new supply arrangements with the United States, Brazil, and Guyana.

To stabilize domestic markets during the Strait of Hormuz crisis, the government reportedly absorbed more than Rs 1.7 lakh crore in excise duty losses. This intervention limited domestic price increases to approximately 7-8%, while other oil-importing nations experienced spikes exceeding 60%. India expanded its crude sourcing from 20 to 41 countries over the last eight years, enabling a rapid pivot to suppliers in Russia, Western Africa, and the Atlantic region.

In addition to procurement shifts, the government is establishing a committee to create strategic reserves of crude oil, liquefied petroleum gas, and liquefied natural gas capable of meeting one month of domestic demand. To modernize procurement, Indian Oil Corp is partnering with Vitol Group to establish a dedicated trading desk. Prime Minister Narendra Modi previously conducted high-level diplomatic visits to the United Arab Emirates, Saudi Arabia, and Qatar to secure critical energy supplies.