India Confronts Energy Security Challenges and Seeks Sustainable Solutions
In recent months, India has been struggling to ensure energy security as its heavy dependence on imported fossil fuels has made the country extremely vulnerable to potential closures of the Strait of Hormuz. Severe disruptions in the energy supply chain have prompted India to strengthen relations with the United States to secure adequate natural gas liquefied (LNG) supplies and reassess its long-term energy security strategy, with consideration for expanding renewable energy capabilities.
Skyrocketing Energy Prices and Their Impact
The prolonged restrictions on energy trade through the Strait of Hormuz have caused India's average crude oil prices to rise from $69 per barrel in March to over $114 per barrel in April. This sudden price surge has exposed India's vulnerability to supply chain constraints. India heavily relies on imported crude oil, LNG, and liquefied petroleum gas (LPG), and the conflict in Iran has driven up prices for all three fuel types in recent months.
| India's Position in Global Energy | |
|---|---|
| Crude oil imports | 3rd globally |
| LNG imports | 4th globally |
| LPG imports | 2nd globally |
| Refining industry | 4th globally |
| Refined product exports | 5th globally |
Dependence on the Strait of Hormuz
Until recently, the majority of India's energy imports passed through the Strait of Hormuz from Russia, while the country exported refined products through the same route. Approximately 45% of India's crude oil imports, 50% of LNG, and 90% of LPG transit through this strait when operating at full capacity. The International Energy Agency (IEA) projects that India will be the primary driver of global oil demand growth from now until 2030, as its population continues to grow and industrialization accelerates.
Shifting Energy Dependence
Previously, India relied heavily on Iran for crude oil; however, stricter energy sanctions against Iran in recent years has led the country to shift its dependence to other Middle Eastern powers, including Iraq, Saudi Arabia, the United Arab Emirates (UAE), and Kuwait. The majority of India's LNG comes from Qatar, UAE, and Oman, while LPG is supplied from UAE, Qatar, Kuwait, Saudi Arabia, and Oman. Since 2022, India has also become increasingly dependent on Russia for energy, although US sanctions against Moscow and threats of trade tariffs from President Trump last year have made India reluctant to further develop this relationship.
Response to the Crisis
The sudden closure of the Strait of Hormuz in March forced Indian policymakers to seek alternative energy sources. In the initial phase of the closure, the US Treasury announced it would waive sanctions on Iranian and Russian crude oil in transit. While the waiver for Iran is no longer effective, the waiver for Russia has been extended until mid-June, with the possibility of further extension. This has helped alleviate pressure on India. However, these waivers do not provide long-term security, meaning India must seek more stable and long-term energy sources.
Strengthening Relations with the United States
In May, India's External Affairs Minister S. Jaishankar announced that the country would expand energy relations with the United States to enhance energy security following bilateral talks with US Secretary of State Marco Rubio in New Delhi.
"We spent time today discussing energy issues, and as you know, the basic responsibility of our government is to address the needs of 1.4 billion people. Clearly, ensuring access to affordable energy for them is our top priority," Jaishankar stated.
The United States Becomes a Primary Energy Supplier
The United States became India's top LNG supplier in May, shipping 900,000 tons of liquefied gas, accounting for 40% of demand and three times more than in April. The US also became the top LPG supplier, sending 630,000 tons of fuel, 60% more than received from the Gulf region that month.
| Increased Energy Supply from the United States | |
|---|---|
| LPG (May) | 630,000 tons (60% increase from Gulf region) |
| LNG (May) | 900,000 tons (40% of demand, triple April volume) |
| Projected LPG (June) | Over 1 million tons |
This surge in energy imports is primarily driven by the closure of the Strait of Hormuz, although it also reflects the growing energy relationship between the two countries that began before the conflict in Iran. Sumit Ritolia, lead research analyst at energy information firm Kpler, explained: "Going forward, India-US energy trade will increasingly focus on gas." Ritolia suggested that the US's abundant supply and expanding export infrastructure make it highly suitable for energy trade with India.
Reassessing Long-Term Energy Strategy
The Indian government previously avoided purchasing energy from the US due to high costs, especially compared to Moscow's discounted crude oil. However, the closure of a critical energy trade route between Europe and Asia left India with no choice but to strengthen relations. US LPG exports to India are expected to exceed 1 million tons in June.
While India can immediately alleviate energy pressure by importing more fossil fuels from the US, the closure of the Strait of Hormuz has exposed the country's vulnerabilities. Greater investment in developing India's renewable energy capacity could reduce dependence on imported fossil fuels and ensure long-term energy security, especially as the country's energy demand is projected to increase in the coming decades.
The current crisis is driving a reassessment of India's energy strategy, balancing short-term fossil fuel needs with a long-term vision for transitioning to renewable energy. The growing cooperation with the US, along with energy supply diversification, could shape the energy security future of the world's second most populous nation.