A big crisis is looming over India’s cheap oil supply. The US has imposed new tough sanctions on Russia’s two largest oil companies, Rosneft and Lukoil, which could severely affect India’s Russian oil lifeline. For the last two years, Russia has been India’s largest oil supplier, which helped a lot in keeping the prices of petrol and diesel stable. But now the question is whether petrol and diesel prices may increase after the new US sanctions? And will Russian oil supplies stop?
‘Sanction shock’ on Russian oil
According to experts, India’s purchases of Russian crude oil may register a sharp decline in the next few weeks. Although imports will not stop completely, due to the new restrictions the supply will decrease at a shocking pace. In November, India was buying 1.8–1.9 million barrels of oil per day from Russia, but in December-January it may fall to just 4 lakh barrels per day, i.e. a decline of more than 70%.
Which companies stopped buying Russian oil?
As soon as the US sanctions came into force, India’s big refining companies Reliance Industries, HPCL-Mittal Energy and Mangalore Refinery and Petrochemicals have stopped purchasing Russian oil. Only Rosneft-backed Nayara Energy will continue to import from Russia, as it is already dependent on that oil.
Why won’t Russian oil stop completely?
Experts say the sanctions are only on some companies, not Russia’s entire oil industry. Therefore, Surgutneftegaz, Gazprom Neft and small traders can now supply oil to India. That means Russian oil will not run out, it will just come through more circuitous routes.
Will petrol and diesel become expensive?
If the supply from Russia decreases rapidly, India will have to buy expensive oil from the Middle East, America, Latin America and Africa. In such a situation, the cost of refineries will increase, due to which there is a possibility that there will be pressure on fuel prices, refining margins will decrease and prices may increase in future.
Increased uncertainty in front of India
Experts predict that the supply chain will remain very uncertain in the coming months. New intermediaries, ship-to-ship transfers, alternative banking channels and clean Russian oil suppliers will change this trend.
Will Russian oil stop?
The possibility of complete closure is still very low, as it is still the cheapest option for India. The government’s focus is on cheap and stable fuel. America has not yet imposed secondary sanctions on buyer countries like India, so Russian oil will definitely come but through less, uncertain and more secret routes.
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