On Feb. 14, US President Donald Trump stated that he wants India to buy his nation’s oil and gas. At the joint press conference with Indian Prime Minister Narendra Modi, Trump stated, “We have more oil and gas than any other country in the world. They (India) need it, and we have it.”
As per Vandana Hari, founder and CEO of Vanda Insights, the announcement is a needs to be seen with a bigger context — if Russia keeps giving discounts on crude imports to India, influx of the fuel from the US may not see a substantial jump.
Current Crude Import Picture
Available data shows India has imported crude worth $95.06 billion in the first eight months of the current fiscal. Five countries account for 83.6% of this imported crude — Russia, Iraq, Saudi Arabia, UAE and the US.
Russia forms the largest portion of our import bill, with 37.6% of our total crude imports in FY25 so far coming from the country. This is followed by Iraq and Saudi Arabia at 20.7% and 15.6%, respectively. USA is our fifth largest crude source, but only has 4.3% contribution to our total crude import bill.
India’s Crude Imports From US
As per Ministry of Commerce data, India has imported crude worth $4.12 billion from the US in the eight months to November 2024. This represents a 4.3% share in our total crude import bill. While this is a single-digit number, it is a jump from the 3.6% share in the previous fiscal.
On a month-on-month basis, US’ share in India’s crude import bill stood at 1.2%, 5.1%, 2.4%, and 5.5% in August, September, October and November 2024, respectively.
Problem With US Crude Imports
Despite India’s increased US crude imports in FY25, challenges remain. Importing US crude is costlier due to the high transportation costs since the shipping route from the US to India is longer compared to sourcing from closer regions like the Middle East. This can lead to increased shipping costs and potentially longer delivery times.
As per Hari of Vanda Insights, the key factor to be considered by the oil ministry as well as refiners is the cost. She states that the bottom line will remain the landed price at which US crude as well as LNG will come at and how it compares with competing supplies.
Landed price refers to the final price of crude shipments once they arrive in India.
Furthermore, different types of crudes have different characteristics and Indian refineries are configured to process specific types of crude. If US crude has different properties, the present refineries might require adjustments in refinery processes, which could involve additional costs.
Will India Buy Lesser Russian Crude?
As per India’s Petroleum Minister Hardeep Singh Puri, India buys crude from where it gets the cheapest rate. This is the main reason why our country’s top crude imports come from Russia- they have been offering India a steep discount on crude imports prices since 2022.
Hari notes that President Trump has not stated that he will be giving India American crude at a discount. She also believes that Russian crude will remain discounted for the foreseeable future, though the discounts may wax and wane. Hari notes that India will continue to maximise Russian crude intake as long as it is offered at a discount.
Thus, if India is to commit to buying more US crude, it will have to buy less of some other crudes.
US crude is typically ‘light sweet’, so this will directly affect Indian imports from West African countries who supply similar light grades of crude. In India’s crude import bill such countries include Nigeria, Algeria, Angola, Ghana and Libya who have an aggregate share of 5% in the import bill.
Similarly, come US crude exports are sour from the US Gulf, so this may eat into Indian imports from the Middle East, as per Hari. This includes countries like Iraq and Saudi Arabia who have a 15% to 20% share in India’s import bill, as well as countries like Kuwait and Oman who have a 3.4% share in total.
. Read more on Business by NDTV Profit.US crude imports will not only have longer shipping routes but will also come to India without a discount. Read MoreBusiness, Economy & Finance, World, Global Economics
NDTV Profit
