Oil at $200? The Iran war a wake-up call for India's energy independence

By Raj Kumar Sinha* 

West Asia has long been the epicenter of global energy politics. A major portion of the world's total crude oil and natural gas reserves is located in this region. Consequently, any military or political crisis in this area directly impacts the global energy market. Iran is one of the world's largest holders of oil and gas reserves, possessing approximately 9 percent of the total global oil reserves and ranking second in the world for natural gas.

Until 2019, Iran was one of India's most crucial oil suppliers, but due to US sanctions, India had to cease oil imports from Iran. The ongoing conflict between the US-Israel and Iran has disrupted energy supply and trade across the entire world. The threat of rising global inflation due to the closure of energy supply routes through the Strait of Hormuz is unprecedented this time. The Iran war has paralyzed one of the world's most critical trade routes. The Strait of Hormuz is a major maritime route for oil transportation via tankers worldwide, facilitating oil shipments from Gulf countries to Europe, Asia, and North America.

Crude oil prices have surged, with Iran warning of prices reaching up to 200 dollars per barrel, which could exacerbate global inflation. Asian countries like India, China, Pakistan, Bangladesh, Thailand, and Vietnam have been hardest hit, as they are heavily dependent on the Middle East for their energy requirements. Today's global economy is largely sustained by a consistent and uninterrupted supply of crude oil. Any international war or major tension directly impacts the supply chain, disrupting oil supply and creating a risk of rising inflation.

In the modern era, energy has become not just a means of living but the most critical factor for industrial development, economic growth, technological progress, and improved living standards. There is a direct correlation between energy consumption and Gross Domestic Product (GDP). India is the world's third-largest energy consumer, importing about 85 percent of its oil requirements and a substantial amount of its gas. Therefore, any war or tension involving Iran directly affects India's energy security, economy, and foreign policy. India's oil import bill is already enormous. An increase in oil prices will impact India's foreign exchange reserves and fiscal balance. India's energy consumption is growing rapidly due to industrialization, urbanization, and a rising population, continuously increasing energy demand. Crude oil is the primary energy source for the transportation system and industries, while natural gas is vital for power generation and the fertilizer industry.

Hence, India must play an active diplomatic role in promoting peace and stability in West Asia. The Iran war has made it clear just how sensitive and volatile the global energy market is. For a major energy-importing country like India, this is not merely an economic issue but also a question of national security. Diversification of energy sources, expansion of renewable energy, strategic reserves, and active energy diplomacy alone can ensure India's energy security. India's energy self-reliance is not just an economic necessity but an essential condition for national security, environmental protection, and sustainable development. A sustainable and decentralized energy system also promotes rural development, job creation, and social equity.

Energy self-reliance can be achieved not only by increasing production but also through efficient energy use. In India, many potential oil and gas reserves are yet to be fully explored. Domestic production can be increased by developing resources in offshore areas, shale gas, and coal bed methane. If the government, industry, and society collectively implement these measures with a long-term vision, India can not only meet its energy needs in the coming decades but also play a leading role in the global energy transition. If tensions escalate in West Asia in the future, India will need to emphasize making its energy strategy more resilient and multifaceted, working on long-term planning.

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*Bargi Dam Displaced and Affected Union