Strait of Hormuz: Oil supply not an issue for India; 'pricing is a bigger concern,' what experts say

Oil supply through the crucial Strait of Hormuz is unlikely to be affected, even though conflict in the Middle-East continues to escalate and crude prices continue to rise.The region remains tense after the recent US strike on Iran, but there is hope that oil supply routes will continue to operate without disruption, experts told ANI.Former HPCL chairman MK Surana said India has reduced its reliance on oil from this region, but warned that any disruption could still push global prices up. “Any disruption in the Straits and Middle East supply will definitely affect crude oil prices globally. Therefore, for India, pricing is a bigger concern than the availability,” he said.Any immediate disruption to oil supplies passing through the Strait of Hormuz is unlikely, adding, “General understanding and hope is that the supply chain through the Straits of Hormuz will not get blocked in reality and Iran will not precipitate actions that will damage any oil infrastructure in the neighbouring countries.”As long as these two situations are maintained, crude prices are unlikely to go above the $80 range, though there may be occasional spikes depending on news flow.However, in case these two conditions become reality, prices will rally sharply, he said.Surana noted that under normal supply-demand conditions and without the current geopolitical tensions, crude oil prices would typically range between $60 and $ 65 per barrel.

Energy expert Narendra Taneja said that the Strait of Hormuz has never been closed before and any move by Iran to block it would invite strong international backlash. “Almost 39 per cent of our oil import tankers pass through the Strait of Hormuz. So, the impact on India would be there, but our biggest worry is the price, not the supply or availability. If Iran is allowed to succeed in blocking the Strait, oil prices may go up to USD 150 per barrel.”Bank of Baroda’s chief economist Madan Sabnavis said short-term price hikes won’t hurt India much, but prolonged surges above $100 a barrel could slow the economy.“A 10 per cent increase may not have much of an impact on the economy where the fundamentals are robust. But if it is over USD 100 for a prolonged period of time, it would mean virtually a 25 per cent increase over the base case assumption and can have a major impact on these variables."Ajay Srivastava of GTRI warned that India is highly exposed if the Strait shuts, with two-thirds of its oil and half its LNG passing through it. In case the Strait is closed, it could spike prices, inflation and government spending.Union petroleum minister Hardeep Singh Puri, however, assured that India is prepared. “We had diversified the sources of supply. Out of the 5.5 million barrels of crude oil that India consumes daily, about 1.5 to 2 million come through the Straits of Hormuz.

We import roughly 4 million barrels through other routes,” he said.He further added that the oil marketing companies have sufficient stocks, with most having stored for up to three weeks. Another company was reported to have a supply sufficient for 25 days. “We can increase the supply of crude through other routes. We are in touch with all possible actors.”With tensions in the Middle East persisting, India and global markets are keeping a close eye on the situation, hoping the crucial Strait of Hormuz remains open to prevent a steep surge in crude oil prices.