India’s energy security challenge is no longer limited to finding enough crude oil. Disruptions linked to the West Asia war have exposed a wider dependence on vulnerable shipping corridors, foreign suppliers, insurance markets, storage capacity and dollar-based payments. The response now taking shape across procurement, refining, logistics and reserves shows how an external energy shock can quickly become an urban systems problem.
The immediate trigger is the disruption around the Strait of Hormuz and the Bab-el-Mandeb Strait, two routes central to the movement of oil, liquefied petroleum gas and other commodities. India will host foreign ministers from Iran, the UAE, Oman, Yemen and other Indian Ocean Region countries later this month, with predictable supply chains, freedom of navigation and the flow of commerce expected to be discussed. The meeting could provide a diplomatic setting for addressing a crisis that has already moved beyond procurement into transport and economic resilience.
That shift matters because imported energy is embedded in nearly every urban activity. Crude and gas support private and public transport, manufacturing, electricity generation, cooking fuel, construction supply chains and the movement of food and goods. When shipping becomes costlier or a key route is disrupted, the effect is not confined to oil companies. It can reach household budgets, factory operating costs, freight rates, municipal services and the price of everyday goods.
India imports nearly 90% of its crude oil requirements and remains heavily dependent on foreign suppliers for LPG and LNG. This level of import dependence makes the geography of energy as important as the quantity available. A cargo may exist in a producing country, but it still needs a functioning route, a vessel, insurance cover, port access, storage and a payment mechanism before it can reach a refinery or household.
The evidence from India’s recent response shows why simply adding more suppliers does not automatically create resilience. During the six months from March to August, India expanded its crude sourcing network to 31 countries. Yet Russia’s share of crude imports rose to 47%, while nine of the 10 newly added suppliers together contributed only 1.4%. The Herfindahl-Hirschman Index, a measure of supply concentration, increased 56% to 2,513 during the period.
In other words, the supplier list became longer while the effective concentration of supply increased. This distinction is important for policymakers. Diversification on paper is not the same as diversification in operational terms. If most volumes continue to come from a small group of countries, or if those volumes still depend on the same vulnerable maritime corridors, the system remains exposed to a common shock.
Russian crude has provided a significant cushion. Russian Deputy Foreign Minister Andrey Rudenko told ET in late September that Russian crude supplies to India had nearly doubled after the Iran war began, reaching 2.25 million barrels per day. But the same arrangement also carries limits. A Reuters report cited in the Economic Times article indicated that Russian arrivals were expected to decline to around 1.75 million barrels per day in September as Moscow reduced exports and Chinese buyers competed for cargoes.
This makes the Russian supply increase a buffer rather than a complete solution. It has helped India compensate for shortages, but it does not remove the country’s exposure to competition, export decisions or changing geopolitical conditions. The central lesson is that resilience cannot rest on replacing one concentrated source with another.
The financial data shows a second layer of vulnerability. India imported 59.7 million tonnes of crude oil during April-June, down 18% from 73 million tonnes in the corresponding period a year earlier. Despite the lower volume, the import bill rose 26%, from $39 billion to $49 billion. Higher crude prices and a weaker rupee increased the cost of maintaining energy supplies even as the quantity imported fell.
That combination places pressure on the current account, foreign exchange availability and inflation. Retail inflation rose to 5.54% in September from 4.83% in August, while wholesale inflation reached 11.39%, partly driven by higher oil prices. The government has warned that prolonged geopolitical tensions and elevated crude prices could add to imported inflation, weaken the rupee and affect capital flows.
The urban consequences are transmitted through several channels. Costlier fuel raises the price of transporting people and goods. Manufacturers face higher energy and logistics costs. Construction activity can be affected through transport, materials and equipment expenses. Households may experience pressure through cooking gas, commuting and the prices of goods whose supply chains depend on diesel or other petroleum products. The impact is therefore not just an energy-sector issue; it is a cost-of-living and urban economy issue.
The government has so far limited some of the immediate consumer impact by asking state-run oil companies to absorb part of the increase instead of passing the full rise through petrol and diesel prices. That approach can moderate visible price shocks, but it transfers part of the burden to the balance sheets and cash flows of public-sector oil companies. The supplied report does not establish how long that arrangement can continue or what its total fiscal and corporate cost may be.
LPG has presented a more specific logistical problem. Before the war, around 90% of India’s LPG imports came through the Strait of Hormuz. After the conflict began, Indian refineries were asked to increase domestic LPG output. Refiners targeted an additional 4,000 metric tonnes per day in September, taking production beyond the existing 37,000-38,000 metric tonnes per day range.
India also increased purchases from the United States. It imported around 0.62 million tonnes of American LPG in August, after 0.89 million tonnes in July. US supplies accounted for more than 73% of India’s LPG imports in August, according to Kpler data cited by the Economic Times. These cargoes helped bridge the shortfall, but they also demonstrate that an alternative supply arrangement can introduce new dependence on longer-distance shipping and availability in another market.
The policy response is consequently spreading across three time horizons. The first is immediate procurement: finding replacement cargoes, increasing refinery output and maintaining domestic fuel availability. The second is financial and transactional: reducing the stress created by daily dollar requirements and volatile currency markets. The third is strategic: building storage and securing longer-term arrangements that can provide time during a disruption.
The Reserve Bank of India’s decision to meet the entire daily dollar requirements of Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum from October 12 addresses the second layer. The three companies could require approximately $200 million a day for crude and petroleum imports, based on August trade data estimates. A dedicated arrangement can make currency transactions smoother and reduce recurring demand in the foreign exchange market. It does not, however, create additional crude, shipping capacity or storage.
The proposed expansion of India’s energy storage partnership with Abu Dhabi National Oil Company addresses the third layer. The arrangement seeks to increase UAE-linked crude storage capacity from 5.8 million barrels to 30 million barrels, with the possibility of storing ADNOC crude in India and at Fujairah in the UAE. The two sides are also exploring LNG and LPG storage and longer-term supply arrangements.
Storage can provide operational breathing room when new cargoes cannot be secured immediately. It can allow refiners and public agencies to respond to a disruption without depending entirely on spot purchases made during a price spike. But storage is useful only when it is connected to workable release procedures, transport links, refinery compatibility and clear institutional responsibility. The supplied report describes the planned capacity and cooperation but does not establish the final implementation schedule or operating rules.
This is the larger institutional question raised by the crisis. Energy security is often measured through import volumes or the number of supplier countries. The current disruption shows that the more relevant measure is the resilience of the entire chain: source, route, vessel, insurance, port, storage, refinery, payment system and last-mile distribution. A weakness at any one point can undermine the rest.
For cities, this means energy planning cannot be separated from transport planning, industrial policy, household welfare or infrastructure investment. A disruption in a maritime corridor can eventually affect buses, trucks, factories, kitchens, construction sites and the prices paid by consumers. The urban system experiences the shock through networks that are physically separate from the sea route but economically connected to it.
India’s response has therefore moved in the right direction in terms of breadth: more suppliers, higher domestic LPG output, alternative American cargoes, currency support and larger storage ambitions. But the available evidence also shows the limits of each measure. Supplier expansion has not reduced concentration, Russian volumes may not remain unlimited, financial support cannot increase physical availability, and storage plans require implementation.
The IORA foreign ministers’ meeting will be an important point to watch because it places energy supply and freedom of navigation within a wider regional framework. What it produces will indicate whether the response remains a series of emergency adjustments or begins to form a coordinated approach to maritime access, reserves and long-term energy logistics. For now, the evidence confirms that India’s energy security problem is not simply how to buy more oil. It is how to keep the urban economy functioning when the routes that deliver that oil become unreliable.
