Abhishek Vij
The ongoing conflict between the United States, Israel, and Iran has engulfed most nations. As this war drags on and the vital waterway of the Strait of Hormuz faces restrictions, the oil and gas supply chains in many countries—including India—have been thrown into disarray. India imports 85 percent of its required crude oil and gas, a significant portion of which arrives from the Middle Eastern Gulf nations via this very route through Hormuz. While the Oil and Natural Gas Commission (ONGC) in India is tasked with the responsibility of exploring for oil and gas, no significant progress has been achieved in this regard. In fact, recent reports indicate that India’s domestic oil and gas production has, on average, declined rather than increased.
When the Gulf War initially broke out, the government asserted that the country possessed adequate reserves of oil and gas, assuring the public that they would not face any difficulties. However, the war dragged on longer than anticipated. The Strait of Hormuz was effectively shut down, and the warring nations—Iran and Israel—locked in a fierce, existential conflict, began bombing each other’s oil and gas installations, thereby exacerbating the crisis. Even at this moment, oil and gas tankers remain stranded at the Strait of Hormuz. Insurance companies are now unwilling to provide coverage for these vessels. India sources approximately half of its gas requirements from Qatar; however, the situation has worsened due to a decline in production there resulting from the ongoing attacks. This has had a direct impact on India. In the early days of March, the country’s oil imports plummeted to approximately 1.9 million barrels. Just a few weeks prior, this figure stood at 25 million barrels.
The situation regarding gas supplies is even more critical. The resulting pressure is now beginning to strain India’s financial framework, as crude oil prices have witnessed a massive surge. While the average price of crude oil stood at $69 per barrel in February, it has now surged in March—climbing from $110 to reach approximately $150 per barrel. There is a possibility that it could reach as high as $180 in the near future. Until last week, the government had kept petrol and diesel prices stable; however, the rising cost of oil has imposed an additional burden of $4 billion on the national economy. On Friday, the price of premium petrol rose by Rs2.36 per liter, while industrial diesel became dearer by Rs22 per liter. Concurrently, the value of the Rupee continues its steady decline. The stock market, too, has hit a record low. Gas supplies from Qatar have been halted, and the prices of LNG have doubled. India sources 25 percent of its LNG requirements from Qatar. The shortage of LPG is also impacting the fertilizer, power, and industrial sectors. A scarcity of fertilizers—specifically urea—will inevitably lead to a decline in agricultural productivity. If fuel availability diminishes, the burden on the power sector will increase. Consequently, the resulting energy deficit is bound to have an adverse effect on industrial sectors.
It is evident that this prevailing environment serves to discourage production, investment, and economic growth. Companies engaged in the distribution of petrol and diesel across the country are reporting losses amounting to Rs8,800 crore. Such losses cannot be sustained for an extended period. The public must be prepared to face the impending hike in oil and gas prices.
The problem is being further exacerbated by profiteers and hoarders. By exploiting the psychology of scarcity, black marketers of essential commodities have now found a perfect pretext for their illicit activities. For them, plundering the pockets of the common people has become all too easy. There is but one solution: an end to the war. However, no one knows when that will happen