Ripples of Conflict
(Source: The Indian Express, Editorial Page)
Also Read: The Indian Express Editorial Analysis: 17 June 2025
Also Read: The Hindu Editorial Analysis: 17 June 2025
| Topic: GS3: Economy, Energy Security, International Relations |
| Context |
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Recent escalations between Israel and Iran have raised concerns about disruption in global oil supplies, leading to a sharp increase in crude oil prices. This development poses serious challenges to energy-importing countries like India. |
Background
- West Asia (Middle East) remains one of the most geopolitically sensitive and energy-critical regions of the world.
- The Strait of Hormuz alone handles nearly 20% of global oil flows. Historically, conflicts involving Iran, Israel, Saudi Arabia, or the US have caused oil market volatility.
- For India, which imports around 87% of its crude oil, such disruptions can trigger inflation, strain the current account, and affect energy affordability for households and industries.
Rising Oil Prices and Market Reaction
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Brent crude crossed $82 per barrel due to fears of supply constraints.
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Energy markets have reacted nervously to escalating tensions, anticipating broader regional instability.
Supply Side Vulnerabilities
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OPEC nations lack the spare capacity to quickly increase supply in response to disruptions.
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Post-COVID recovery has weakened US shale oil production, further limiting global alternatives.
India’s Energy Dependency
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India is the third-largest energy consumer globally but heavily dependent on oil imports.
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High oil prices increase:
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Current Account Deficit (CAD)
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Inflation and Fuel Subsidy Burden
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Pressure on Rupee and Fiscal Deficit
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Mitigation Measures and Strategic Choices
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India has built Strategic Petroleum Reserves (SPR) but they offer limited coverage.
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Efforts to diversify sourcing (e.g., from Russia, Latin America) are ongoing but incomplete.
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Investment in renewable energy (solar, wind, green hydrogen) is a long-term strategy.
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Promotion of electric vehicles (EVs) and ethanol blending are part of demand-side interventions.
Conflict Impact and India’s Response
| Issue Area | Impact of Israel-Iran Conflict | India’s Strategic Response |
|---|---|---|
| Crude Oil Prices | Price surge due to fears of supply chain blockade | Advance contracts, diversify suppliers |
| Inflation | Fuel and transport costs rise | Subsidy management, monetary tightening |
| Current Account Deficit | Worsens due to higher import bill | Export promotion and currency stabilization |
| Strategic Reserves | Drawdown expected if conflict escalates | Expansion and replenishment of SPR |
| Long-term Energy Plan | Push for self-reliance in energy | Green energy, EV policy, energy security mission |
Conclusion / Way Forward:
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India must institutionalize an energy security architecture that reduces reliance on volatile global oil markets.
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This involves strategic petroleum storage, diversified sourcing, aggressive renewable adoption, and reforms in fuel pricing.
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A stable energy policy is not just economic but strategic in safeguarding national interests during global conflicts.
| Practice Question: (GS-3 | 15 Marks | 250 Words) Discuss the impact of West Asian geopolitical tensions on India’s energy security and the possible mitigation strategies. |
