Delhi. India is turning to Latin America to diversify its sources of crude oil amid tensions over the Iran conflict and the Strait of Hormuz. This information has been obtained from the data of 'Kepler' which monitors the movement of ships. According to data, there has been a sharp increase in India's crude oil imports from Venezuela in August and the South American country has become India's fourth largest supplier. Supplies from Venezuela stood at about 444,000 barrels per day (bpd), more than Iraq's 118,000 bpd and the US's 153,000 bpd. Venezuela's share in India's supply diversification has increased rapidly since imports resumed in April.
Following supply disruptions from West Asia, Indian refineries have increased purchases of crude from Venezuela, Brazil and Africa, maintaining heavy dependence on Russian oil. Russia still remains India's largest supplier and imports from there stood at around 2 million bpd in August. In June-July, crude oil imports from Russia reached about 26 lakh bpd, which was more than half of India's total crude oil imports. This provided some degree of protection against disruption to traditional supply routes to West Asia.
Crude oil is the raw material that refineries convert into fuels like petrol and diesel. “India is working on multiple fronts simultaneously,” said Kepler analyst Sumit Ritolia. This includes increasing domestic oil production where possible, diversifying crude oil suppliers and transportation routes from abroad, building strategic and commercial reserves, and promoting alternatives such as gas, biofuels, electric vehicles and renewable energy.'' He said a comprehensive strategy is emerging from the current developments.
India is not moving away from oil in the near future but is trying to make its crude oil supply more secure and robust by expanding the range of suppliers and transportation options. Ritolia said completely replacing crude oil coming from West Asia is neither practical nor necessarily economically beneficial. Producers from Gulf countries are geographically closer to India. This keeps travel time and transportation costs low compared to alternative sources such as Venezuela, the United States, West Africa and Latin America. Despite this, Indian refineries have shown considerable flexibility in switching purchases between crude coming from West Asia, Russia and the Atlantic Basin.
India's total crude oil imports have been around 5 million bpd in recent months, keeping refinery operations relatively strong despite supply constraints. He said long-haul supplies from Venezuela, the United States, West Africa or Latin America could increase freight and insurance costs. In such a situation, geopolitical disruptions may increase the oil import bill for India, even if the refineries are successful in obtaining adequate quantities of crude oil. Ritolia said, “Diversification of supply increases security, but it cannot completely protect India from geopolitical risks.”
India's dependence on crude oil
India will have to continue importing large quantities of crude oil. Therefore, the impact of any major disruption will ultimately result in higher oil prices, freight and import costs.'' India remains one of the major oil demand-driven countries in the world. Oil demand is being supported by rising vehicle ownership, transportation, aviation, industrial activity and petrochemical consumption. Despite the rapid adoption of electric vehicles, its impact on the existing vehicle fleet will take time. At the same time, due to increase in transportation and industrial demand, the need for liquid fuel will remain.