India's Resilience in the Face of the US-Iran War Energy Shock

India managed the severe energy shock from the US-Iran conflict effectively, avoiding major disruptions to its energy supplies despite the closing of the Strait of Hormuz in February. This situation posed a significant threat to India's energy imports, particularly crude oil and liquefied petroleum gas (LPG).

Impact and Initial Threat

• India imports almost 90% of its crude oil and 60% of its LPG, with a significant portion from the Gulf.
• The war disrupted the physical supply of these fuels, risking inflation, industrial production, and public confidence.

Strategies for Resilience

India's response to the crisis highlighted the layers of resilience critical for modern energy security.

• Strategic Petroleum Reserves: Although important as a first line of defense, India's reserves are modest by international standards.
• Commercial Inventories: Refiners held substantial reserves, approximately 190 million barrels, equivalent to 35 days of national consumption, buying time for securing replacement cargoes.
• Diversified Procurement: Years of diversifying crude supply enabled flexibility, with imports from 41 countries, up from 27.
• Quick Coordination and Procurement: Essential for sourcing replacement supplies amidst competition from other Asian importers.

Managing Supply Shortages

• Russia became a major supplier by June, providing 2.56 million barrels per day, over half of India's imports.
• LPG Production: Refineries were reconfigured to maximize LPG production, increasing domestic output from 35,000 mt to 54,000 mt daily.
• India engaged in "energy diplomacy" with Tehran to ensure safe transit of Indian-flagged LPG tankers through the Strait of Hormuz.

Demand Management and Economic Stability

• Encouraged the use of piped natural gas to reduce LPG demand.
• Adjusted commercial LPG allocations to prioritize household needs.
• Government cushioned retail fuel prices to prevent broader economic impact from spiking international energy prices.

Future Plans for Energy Security

• Expansion of strategic reserves is underway, with a phase 2 expansion adding 6.5 million mt to existing capacity.
• Overall goal is to achieve 90 days' worth of net import cover in inventories, aligning with the International Energy Agency benchmark.

These measures provide policymakers with greater flexibility and reduce commercial pressures in future disruptions, illustrating a success based on long-term preparedness and adaptive crisis management.