Growing oil imports make India more vulnerable to supply disruption, price volatility: IEA1 min read . Updated: 10 Jan 2020, 02:24 PM IST
- India needs to diversify its energy sources and add alternate fuels, says IEA
- IEA also estimated that India will surpass China in oil consumption in the mid-2020s
NEW DELHI : The International Energy Agency (IEA) has warned that India’s growing dependence on oil imports will make the country even more vulnerable to supply shocks and price volatility, and that the third largest economy of Asia needs to diversify its energy sources and add alternate fuels.
IEA said in its ‘India energy policy review 2020’, released here in the presence of ministers handling energy portfolios and officials of federal think tank Niti Aayog, that India’s strong dependence on oil imports, already at 83%, is expected to increase further. The agency also estimated that India, which currently is the world’s third-largest consumer of oil after China and the US, will surpass China in oil consumption in the mid-2020s.
“With an oil import bill of around 4% of gross domestic product today, and 65% of imports coming from the Middle East (West Asia) through the Strait of Hormuz, the Indian economy is and will become even more exposed to risks of supply disruptions, geopolitical uncertainties and the volatility of oil prices," IEA said. The warning comes amid increased tension in West Asia between the US and Iran after a US drone strike that killed a senior Iranian military commander.
India’s oil consumption of 4.4 million barrels per day in 2017 already represents 5% of global consumption, and it is set to grow at a rapid pace of 3.9% a year well ahead of the global average of 1.2% in the medium term despite the market penetration of alternative fuels like biofuels and gas.
IEA said the rapid growth was driven by transport, mostly freight, followed by industry. Another key factor pushing up energy consumption is the increased use of liquefied petroleum gas (LPG) as a cleaner cooking fuel, replacing firewood or kerosene. This, the report, said makes India one of the world’s largest LPG importers.
The report said proven oil reserves in India are limited compared to domestic needs while production is on the decline.