India's Oil Import Bill Soars 61% as Hormuz Crisis Drives Prices Up

India's crude oil import bill surged by over 61% year-on-year in the first quarter of the current financial year, reaching $49.8 billion, even as import volumes dipped slightly. The rise is attributed to supply tightness and elevated prices stemming from the West Asia crisis and disrupted energy flows through the Strait of Hormuz, according to provisional data from the Petroleum Planning and Analysis Cell (PPAC).

Similarly, liquefied natural gas (LNG) imports and petroleum product exports declined in volume terms but increased in value. Overall, the country's net oil and gas imports jumped 45.3% in value from year-ago levels to $44.9 billion, underscoring the adverse economic impact on energy import-dependent India.

India depends on imports to meet over 88% of its crude oil requirement and about half of its natural gas consumption, which is imported as LNG. Despite this dependence, India is a net exporter of petroleum products due to its massive refining capacity, while it also imports some products like liquefied petroleum gas (LPG).

Approximately 40% of India's crude oil imports, 60% of its LNG imports, and 90% of its LPG imports came from West Asia through the Strait of Hormuz. The crisis led to physical supply tightness and a surge in international prices, forcing India to import at extremely high rates as it prioritised supply security over price considerations.

A June memorandum of understanding between the US and Iran had briefly eased tensions, but the subsequent collapse of the pact and renewed conflict in the Gulf have again choked energy flows through the strait after a short-lived three-week recovery.

According to PPAC data, crude oil imports in the June quarter rose 61.2% year-on-year to $49.8 billion, while volumes declined 4.5% to 59.8 million tonnes (about 438 million barrels). The average landed price of imported crude was about $113 per barrel, up from around $67 per barrel a year earlier. India's dependence on imported oil in April-June stood at 89.1%, flat year-on-year.

LNG imports fell 8.6% in volume to 7,674 million standard cubic metres (mscm) from 8,396 mscm a year earlier, but the import bill rose nearly 6% to $3.6 billion due to higher prices. Petroleum product imports declined almost 42% in volume to 7.1 million tonnes, as supplies of LPG and other products were impacted by the West Asia war. In value terms, the decline was relatively lower at 27.6% to $4.2 billion, reflecting high international prices.

India's petroleum product export volumes dropped by a fourth to 11.3 million tonnes in April-June from 15 million tonnes a year earlier, as domestic supplies took precedence amid the global supply crunch. However, export value surged nearly 40% due to higher international fuel prices.

Energy imports are a major component of India's overall imports, and any meaningful increase has ramifications for the trade balance, current account, inflation, and the rupee's exchange rate. Wholesale fuel and power inflation in India was 25% in April, 30.3% in May, and 27.4% in June, according to government data.