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Diversification must for oil security

India remains vulnerable to volatility in the global crude oil market.

ET Bureau|
Sep 19, 2019, 07.23 AM IST
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oil-refinery
The country has tried to spread its risks by diversifying sources of crude oil, but falling domestic production and heavy dependence on imports remain a worry.
Given its high dependence on imports, India remains vulnerable to volatility in the global crude oil market.

The country has tried to spread its risks by diversifying sources of crude oil, but falling domestic production and heavy dependence on imports remain a worry.

1. Domestic production has declined

India’s major oilfields are well past their prime India’s Crude Output (Million Tonnes)

1

2. Rising consumption has raised imports

Share of imports in India’s total crude oil use

Import Dependence % of Crude Oil

1

3. High import dependence creates risks for economy

a] Current account deficit widens
b] Currency comes under pressure
c] Inflation rises
d] Fiscal deficit takes a hit as subsidies rise

4. India is diversifying crude import basket to reduce risks

India has diversified its sources and reduced dependence on the volatile Middle East region — the stoppage of imports from Iran has helped. The country has increased shipments from the US
1

5. But this may not address all the risks

a] Falling domestic output remains a concern
b] Oil supply not really a problem given adequate stocks in India and with other major consumers
c] Risk of sudden spike in oil prices remains

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