India Absorbs Global Oil Shock As Hormuz Crisis Tests Energy Security Framework

New Delhi: The closure of the Strait of Hormuz earlier this year has triggered one of the most severe global energy disruptions in recent decades, sharply exposing the vulnerabilities of oil-importing economies, including India. Yet, despite soaring crude prices and widespread fuel rationing measures across several nations, India has managed to shield consumers from any increase in petrol or diesel prices so far.

The crisis began on February 28, when the Strait of Hormuz — a critical global energy transit chokepoint — was shut, disrupting nearly 88 per cent of India’s crude oil imports that move through the route. Around 40 per cent of India’s oil imports originate from Gulf nations, making the disruption particularly significant for the country’s energy security.

The fallout was immediate. Marine insurance premiums surged, freight charges rose sharply, and delivery schedules were extended. The closure of Qatar’s Ras Laffan facility, one of the world’s largest liquefied gas export terminals, further intensified pressure on global energy markets. Brent crude prices climbed from nearly $70 per barrel before the crisis to approximately $126 per barrel by mid-March.

In response, the Indian government initiated a series of emergency interventions aimed at stabilising domestic supply and insulating consumers from global volatility. Within days, the Centre introduced the Liquefied Petroleum Gas (Maintenance and Stocks) Control Order, directing refineries to maximise LPG output. Domestic LPG production reportedly increased from 36,000 tonnes per day to 54,000 tonnes daily.

This was followed by the Natural Gas (Supply Regulation) Order, which capped refinery natural gas consumption at 65 per cent, freeing up supply for households, public transport systems, industries and fertiliser plants.

Simultaneously, India diversified crude sourcing away from the Gulf by increasing imports from Russia, the United States, West Africa and the Atlantic basin, while also boosting domestic production.

The government also deployed the Indian Navy in the Gulf of Oman to secure shipping routes and imposed temporary export levies on diesel and aviation turbine fuel. Excise duties on petrol and diesel were significantly reduced, with diesel duty reportedly brought down to zero.

Despite global crude prices nearly doubling, retail fuel prices in India have remained unchanged. This contrasts sharply with many countries where fuel prices have risen substantially — including Japan and South Korea by over 30 per cent, Spain by 34 per cent, and the UK by 22 per cent. Several nations have additionally imposed rationing and austerity measures to manage the crisis.

However, analysts note that India’s strategy has come at a substantial fiscal cost. Estimates suggest that oil marketing companies' under-recoveries between mid-March and the end of April touched nearly ₹62,500 crore. While the government’s intervention has prevented an inflationary spiral, experts believe the crisis underlines the urgent need for India to further strengthen strategic petroleum reserves, refining capacity, renewable energy investments and ethanol blending programmes to reduce long-term dependence on imported crude.

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