Impact of US-Israel Strikes on Iran and Closure of the Strait of Hormuz

The bombing of Iran by the US and Israel, and the subsequent closure of the Strait of Hormuz, have led to significant disruptions in oil and gas supplies. This event has proven that the previous assumption of the strait remaining open, even during conflicts, was overly optimistic.

Consequences of Supply Disruptions

• The closure of the strait has halted oil and gas flows from the Gulf.
• Gas marketers are rationing supplies, and rural households might face slower LPG refills.
• India's petroleum ministry reports adequate oil stocks, but LPG and LNG inventories are strained.
• India exports petrol, diesel, and ATF, but ongoing disruptions could lead to broader rationing.

Challenges in Energy Security

• Energy security is about resilience and the ability to absorb shocks, not self-sufficiency.
• India has diversified crude sources, but heavy reliance on Gulf supply poses a challenge.
• Lack of strategic petroleum reserves and limited capacity increases vulnerability.
• India’s strategic reserves have been stagnant at 5.33 million metric tonnes.

Comparison with China

• China has effectively used stockpiling as a strategic tool, with significant daily additions to crude inventories.
• China’s total crude stocks provide 110-140 days of import cover; India’s reserves cover only 25 days of consumption.
• China’s Energy Law mandates stockpiling obligations and introduces corporate social responsibility reserves, a step India has not taken.

Strategic Implications for India

• India has operated on the assumption of stable global supply, which is now being tested.
• The current crisis highlights the need for better investment in shock absorption and strategic reserves.
• Energy security is essential for managing supply chains, stabilizing markets, and adjusting demand during crises.