Saudi Arabia has temporarily shut its East-West oil pipeline after reported attacks from Iraq.
About East-West pipeline
- The pipeline, also called Petroline, is an1,200km East-West pipeline in the 1980s.
It crosses Saudi Arabia from Abqaiq oilfield in the east to the Yanbu port on the Red Sea in the west.- From Yanbu, oil tankers usually sail east to Asia through the Bab el-Mandeb, while those headed west go through the Suez Canal.
- It is an important Hormuz-bypass routes (see infographic for other bypass pipelines) for exporting Saudi Arabian crude during the Iran war.
Potential impact on India
- Disruption of global oil supply: The closure of the pipeline has halted the flow of Saudi oil exports, which represents 4-5% of global oil supplies.
- Saudi oil accounts for ~7-8% of India’s total oil imports over the past couple of months, a vast majority of coming from the Yanbu export facility.
- Surging Import Costs: India imports over 88% of its crude oil needs and every $1-per-barrel increase in price increases oil import bill by up to $2 billion annually.
- Widening Current Account deficit (CAD): Every 10% oil price increase typically widens India’s current account deficit by 0.4% of the GDP.
- Other economic impacts: Inflationary pressures, impact on India’s trade balance and the rupee’s exchange rate, etc.
