A recent report from S&P Global India Research Chapter reveals that the ongoing Middle East crisis has underscored critical vulnerabilities in India's energy security. With over half of India’s crude oil imports passing through the Strait of Hormuz, the country faces significant exposure to disruptions in this vital waterway.
According to S&P Global, the effective closure of the Strait of Hormuz has led to the largest disruption in energy supplies since World War II. This unprecedented event has cut crude oil and refined product supplies by 20% and liquefied natural gas (LNG) supplies by 16% globally. The impact has been particularly severe in Asia, especially in emerging and developing economies like India, which possess low reserves of oil, refined products, and gas, coupled with limited capacity to absorb price shocks.
India's Supply Reductions and Resilience
Dave Ernsberger, President of S&P Global Energy, emphasized the severity of the situation for India. “The disruption to energy supplies through the Strait of Hormuz has been a severe test of energy security for high-growth Asia. India, which relies heavily on the Strait of Hormuz for oil, refined products, gas and adjacent supply chains, has faced reductions in crude and LPG of 20% and 12%, respectively, as well as a drop in LNG of 16%,” Ernsberger stated. He stressed that economic resilience and energy security are paramount as India navigates this continuous supply shock.
The Path Forward: Diversification and Storage
The crisis highlights an urgent need for strengthening energy security across Asia through several key measures. For India, this means diversifying supply sources and building robust strategic reserves of crude oil, refined products, and, where feasible, gas. The report specifically calls for an integrated storage policy that encompasses both fuels and electricity to create a truly resilient energy system.
India's energy transition journey will now be shaped not only by its climate ambitions but also by the imperative for resilience in an increasingly unpredictable global environment. The Strait of Hormuz crisis serves as a stark reminder that external energy risks significantly bolster the case for greater self-reliance. A critical challenge for the nation's power sector will be to deliver clean, reliable, and affordable electricity at scale, aligning with India's broader ambition to solidify its position as a leading global power.