There is growing fear that Iran might block the Strait of Hormuz as tensions with Israel and the United States increase. If that happens, it could disrupt oil and gas supply around the world and cause prices to rise sharply. This could affect India too, which is one of the largest buyers of crude oil.

The Strait of Hormuz is a narrow waterway—just 33 kilometres wide at its smallest point—that connects the Persian Gulf to the Arabian Sea. Countries like Iran, Iraq, Saudi Arabia, and Kuwait use this route to ship most of their oil and gas to other countries. Iran’s Parliament has now approved the closure of the Strait of Hormuz in response to US attacks, making the situation more serious.

India imports about 80% of its oil needs, and much of that comes through the Strait of Hormuz. So, any blockage could cause problems. Oil prices have already gone up because of the fear of war. Brent crude oil prices recently surged to $78.93 a barrel, and some experts warned it could reach $140 if the Strait is blocked. However, prices later dropped to $71.48.

How is India protecting itself from this oil crisis?

Even with these threats, India is not panicking. Petroleum Minister Hardeep Singh Puri said that India has many sources for buying oil, and not all of them depend on the Strait of Hormuz. He also highlighted India’s Strategic Petroleum Reserves (SPR), which are kept in large underground rock caverns at three places: Andhra Pradesh, Karnataka, and Tamil Nadu. These reserves help India face any sudden supply problems.

India’s reserves store about 5.33 million metric tonnes of crude oil, which equals around 38 million barrels. This is enough to meet about 10 days of India’s oil needs. There are also additional oil stocks with private companies, which could stretch the total to about 74 days.

The government is also building two more SPR sites—one in Odisha (4 million tonnes) and another in Karnataka (2.5 million tonnes).

India is also importing oil from other countries like the United States, Nigeria, Angola, and Brazil. Although shipping from these countries takes more time and money, it helps India reduce its dependence on the Middle East. India has also increased oil imports from Russia despite sanctions and now plans to import 2.2 million barrels per day, more than what it buys from Saudi Arabia and Iraq combined.

Indian oil refineries are flexible and can quickly adjust if there is a disruption in supply. India also has long-term agreements with countries like Iraq, Saudi Arabia, and Russia, which help ensure a regular supply even in times of crisis.

Why does India store oil in underground rock caverns?

India stores its strategic oil reserves deep underground in rock caverns. These caverns are located about 90 metres below the ground and are about a kilometre long. One such LPG cavern in Visakhapatnam is 196 metres below sea level and is among the deepest in the world.

Storing oil underground has many benefits. These caverns are safer than above-ground tanks because they are protected from bombings, natural disasters, and theft. They also prevent oil from evaporating and reduce pollution risks. The caverns are sealed and have monitoring systems to detect leaks or contamination.

The idea of using underground caverns for oil storage started in Sweden during wartime and has since been adopted by other countries like Japan, South Korea, and Finland. In India, this idea took shape in 1998 under Prime Minister Atal Bihari Vajpayee after the 1990 Gulf War highlighted the dangers of not having a strategic oil reserve.

India is now working to expand these reserves. In 2021, the government approved two more SPR sites under the public-private partnership model. These will add 6.5 million metric tonnes of storage capacity.

In times of crisis, these reserves act like shock absorbers. For example, during the COVID-19 pandemic in 2020, oil prices fell sharply. India used that chance to buy oil at cheap rates and filled its caverns, saving about Rs 5,000 crore.

Oil companies in India usually time their purchases based on price trends to save foreign exchange. These strategic reserves help by providing a buffer when prices go up or when supplies are at risk.

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