India's crude oil import dependence crosses 90%, raising economic risks

India's crude oil import dependence crosses 90%, raising economic risks

India's dependence on imported crude oil has crossed the 90% mark, a trend that could make the economy more vulnerable to external shocks, according to a recent report by EY.

The study, titled "India's Petroleum Economy: Coping with Vulnerabilities," warns that petroleum is one of India's biggest external risks.

It recommends augmenting strategic crude oil reserves and reducing import dependence as key strategies to mitigate this risk.

Augment strategic crude oil reserves

The EY report suggests that India should consider a detailed strategy for maintaining its crude oil reserves.

This would include defining the volume of reserves, strategies for purchases and releases from these reserves, and considering relevant carrying costs.

The report also emphasizes the need to continue augmenting refining capacity and accelerate the transition toward greener alternatives and other sources of energy such as nuclear power.

India's dependence on imported crude steadily increased over the years

The report highlights one structural feature of India's petroleum economy: a high dependence on imported crude oil and a limited domestic production of crude oil.

The contribution of domestic production to total consumption has been quite limited over the years.

The report notes that India's dependence on imported crude has increased steadily from 55% in FY1999 to slightly above 90% in FY26, highlighting the growing reliance on foreign sources for this essential resource.

Domestic production peaked in FY12 before declining

Domestic crude oil production peaked at 35.9 million metric tons in FY12, but has since declined to 26 million metric tons in FY26.

Meanwhile, the consumption of petroleum products has grown significantly from 90.6 MMT in FY1999 to a whopping 243.2 MMT in FY26.

This sharp increase further highlights India's dependence on imported crude oil for its energy needs and economic growth.