India’s energy security amid conflicts, Pg10

Key Highlights:

• The conflict in West Asia has rapidly impacted India's economy, with the International Energy Agency (IEA) describing the current crisis as more severe than previous shocks.
• Brent crude oil prices rose to $109.03 per barrel during the conflict, and India's economic growth is projected to slow from 7.4% in FY26 to 6.5% in FY27, with inflation rising from 2.3% to 4.4%.
• Europe's gas consumption fell by 20% between 2021 and 2024, while combined imports of gas and liquified natural gas (LNG) declined by 18%.
• India imports over 85% of its crude needs, with about 45% passing through the Strait of Hormuz, making it vulnerable to disruptions.

Detailed Insights:

• The Russia-Ukraine War exposed the risks of energy dependence, prompting Europe to reduce its reliance on Russian gas from 45% to 12% by 2025.
• The Strait of Hormuz remains a critical chokepoint, with about 25% of the world’s crude oil passing through it, causing rapid price shocks in global markets.
• China has secured nearly 25 million metric tons of LNG per year through contracts, while South Korea has secured 273 million barrels of crude oil from outside the Strait of Hormuz.
• India's oil consumption is expected to reach 5.74 million barrels per day (mb/d) in 2025 and 5.99 mb/d in 2026, making it a key driver of incremental oil demand as Chinese demand flattens.
• Despite diversifying its import basket to include countries like Iraq, Saudi Arabia, UAE, and the United States, India's high crude oil dependence makes it vulnerable to price and exchange rate fluctuations.
• India's expansion into solar, batteries, electric vehicles (EV), and storage may reduce oil use but increase reliance on critical minerals like lithium, cobalt, and rare earths.
• China dominates the processing of critical minerals, controlling over 91% of global rare-earth production, while India processes less than 5% of its projected 2035 battery-grade mineral requirements domestically.
• To enhance energy security, India needs to increase strategic reserves, reduce oil intensity in transport, strengthen maritime resilience, and secure supply chains for critical minerals.

Key Concepts Involved:

• Energy Security: Ensuring access to affordable, reliable, and sustainable energy sources to meet a nation's needs.
• Energy Transition: Shift from fossil fuels to renewable and sustainable energy sources to reduce carbon emissions.