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| Fig. 1: India's oil balance in thousands of barrels per day. [2] (Source: Wikimedia Commons) |
Due to Russia's invasion of Ukraine, many top importers of Russian oil have cut ties with the nation as well as imposed sanctions. This has caused the prices for Russian oil to drop tremendously for those willing to buy it. Many nations have started to buy more Russian oil due to its new affordability. India is a specific example.
The Indian subcontinent is the third largest consumer of oil in the world. About 85% of its oil comes from imports. [1] While India has consistently claimed to not rely heavily on Russian oil, many reports show that its imports have skyrocketed in recent months due to how cheaply they can obtain it. Indian officials have claimed that India's dependence on Russian oil is far less than the EU's and that purchasing oil at such cheap prices aids the problem of inflation in their country. [2]
Due to prices dropping, the freight prices are well worth it for India to snatch up Russian Crude. India has been able to purchase Russian oil extremely cheap, even around $30 per barrel (compared to the roughly $100-$120 other international oil trades e.g. Brent Crude).
India's reliance on Russian oil has grown quickly as Russia has become the 2nd biggest source of oil to the country, surpassing Saudi Arabia and only behind Iraq. Pre-war oil import levels indicate Russia was not a major oil source for India. For comparison pre war, India imported 20.5 million tonnes of crude oil from the United States compared to just 4.5 million tonnes from Russia. [3]
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| Table 1: India's top sources of oil in May 2022 during Ukraine-Russia war. [4] |
With the EU planning to completely halt crude oil purchasing from Russia, the price of oil globally is set to rise significantly while Russian Crude drops. If India is able to obtain Russian oil far cheaper than other global companies, India may continue this supply relationship. However, Russia might also conceivably reduce shipments after the Ukranian crisis passes, should it be able to sell oil to other countries at a higher price than it can get at present.
© Ananya Ganesh. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] D. P. Dhinakaran and N. Kesavan, "Exports and Imports Stagnation in India During Covid-19 - A Review," GIS Business 15, 1158 (2020).
[2] S. Ray, "How India Fights Inflation: Buying Cheap Russian Oil Despite Western Criticism," Forbes, 28 Jul 22.
[3] "BP Statistical Review of World Energy 2022," British Petroleum, June 2022.
[4] "Explained: How Ukraine War is Changing India's Oil Purchase," Times of India, 13 Jun 22.
