Why in the News?

• India’s energy security is in focus due to rising geopolitical conflicts in West Asia, which have exposed vulnerabilities in its import-dependent energy supply chains and macroeconomic stability.

What’s in Today’s Article?

• Energy Security (Introduction, Changing Definition, Impact of West Asia Conflict, Energy Demand, Diversification of Imports, Structural Challenges, Way Forward, etc.)

Introduction

• Recent geopolitical conflicts, particularly in West Asia, have exposed the fragility of global energy markets and their immediate transmission effects on domestic economies like India.
• India, importing over 85% of its crude oil, faces acute vulnerability to external shocks.
• The sharp rise in Brent crude prices during conflicts and projected macroeconomic impacts, including slower GDP growth and rising inflation.
• This underscores that energy security today extends beyond cost efficiency to resilience and strategic diversification.

Changing Definition of Energy Security

• Traditionally, energy security was understood as ensuring access to affordable fuel. However, the evolving geopolitical landscape has fundamentally altered this definition.
• Today, it encompasses:

• Resilience against supply disruptions
• Diversification of suppliers and routes
• Macroeconomic stability amid price volatility

• The Russia-Ukraine conflict served as an early warning, exposing the risks of overdependence on a single supplier.
• Europe’s response, cutting reliance on Russian gas from 45% to 12% and accepting underutilised LNG infrastructure, demonstrates a shift toward “insurance-based” energy planning rather than pure efficiency.

Impact of West Asia Conflict on India

• The ongoing tensions in West Asia have amplified risks for India due to its heavy reliance on maritime oil routes.
• The Strait of Hormuz, a critical chokepoint through which nearly 25% of global oil passes, plays a pivotal role in determining price stability and supply continuity.
• India imports roughly 45% of its crude through this route, making it highly susceptible to disruptions.
• Such geopolitical shocks can quickly translate into domestic inflationary pressures and economic slowdown.
• Additionally, operational risks have increased, as seen when Indian LPG carriers required naval escort under Operation Sankalp during heightened tensions.

India’s Energy Demand and Global Position

• India is now the world’s third-largest oil consumer, and its demand trajectory continues to rise. According to projections:

• Oil demand expected to reach 5.74 mb/d in 2025 and 5.99 mb/d in 2026
• Demand growth (~130 kb/d) surpasses China’s (~80 kb/d)

• This positions India as a key driver of global oil demand growth. In a scenario where OECD demand is declining, India’s consumption becomes strategically significant for global energy markets.

Diversification of Energy Imports

• India has demonstrated considerable agility in adapting to supply shocks.
• A notable shift has been the rise in Russian oil imports, from just 2% before 2022 to nearly 36% in FY2024-25, making Russia India’s largest supplier.
• Simultaneously, India maintains a diversified import basket including Iraq, Saudi Arabia, UAE and the United States.
• This diversification strategy reinforces the concept of “optionality”, India’s ability to switch suppliers based on geopolitical and economic conditions.

Structural Challenges in Energy Security

• Despite adaptive strategies, several structural vulnerabilities persist:
• High Import Dependence
  • India’s crude oil import dependence reached 89.4% in FY2024-25, with domestic production remaining limited. This exposes the economy to fluctuations in global prices, freight costs, and exchange rates.
• Geographic Constraints
  • Even with diversified suppliers, logistical realities such as chokepoints (e.g., Strait of Hormuz) cannot be bypassed. Maritime risks continue to constrain strategic flexibility.
• Emerging Risks from Energy Transition
  • While transitioning to renewable energy reduces fossil fuel dependence, it introduces new vulnerabilities:

• Dependence on critical minerals like lithium, cobalt, nickel, and rare earths
• China’s dominance (over 90% in rare earth processing)
• India’s limited domestic processing capacity (<5% of projected needs by 2035)

• Thus, the energy transition shifts dependency rather than eliminating it.

Global Comparative Strategies

• Other major economies have adopted proactive measures to enhance energy security:

• China: Long-term LNG contracts (~25 million metric tons annually)
• South Korea: Secured oil supplies bypassing chokepoints
• Japan: Strategic reserves equivalent to 254 days of consumption

• These approaches emphasise long-term planning, stockpiling, and route diversification, areas where India still needs to scale efforts.

Strategic Path Forward for India

• To strengthen energy security in a conflict-prone world, India must adopt a multi-dimensional strategy:

• Expand Strategic Petroleum Reserves (SPR): Build larger buffers against supply shocks
• Reduce Oil Intensity: Promote EVs, public transport, and fuel efficiency
• Enhance Maritime Security: Strengthen naval capabilities to secure trade routes
• Develop Critical Mineral Ecosystem: Invest in domestic mining, refining, and international partnerships
• Strengthen Supply Chain Resilience: Reduce overdependence on single countries