India must plan for an oil crisis

Incidents like the Abqaiq fire in the Gulf can have instant fallout

Uncertainty is the primary additive to global crude these days. India, the world’s fastest growing oil importer, needs to prepare for the possibility of oil prices and supplies going awry. The recent attack on the massive Abqaiq oil complex in Saudi Arabia is a reminder of India’s over-dependence on the world’s most unstable region. But, the

Persian Gulf is still a distance away from war, and the oil prices are unlikely to superspike.

The attack fits in a pattern of Tehran targeting Saudi oil exports. The message: Iran may not be able to export oil, but do not assume you will be able to do so without hindrance. What has encouraged Iran to up the ante is the increasing evidence that the United States (US) is no longer as wholehearted in supporting the Arab monarchies as it was three years ago. The dismissal of anti-iran hawk, National Security Advisor John Bolton, President Donald Trump’s tepid response to the downing of a US drone by Iran, and the president’s desire for a Us-iran summit are evidences Riyadh can no longer be sure the US will have its back. The result is a game of shadows in which Iran tries to force Saudi Arabia to seek an accommodation that would include the easing of oil sanctions.

Fortunately, for importers like India, there is a global surplus of black gold. The Abqaiq attack saw prices rise sharply, but only to the levels they were less than a fortnight ago. The impact of a slowing world economy and expectations of reduced crude demand on oil prices far outweighs the impact of the fireworks in the Gulf. There is still a lot of crude available and prices have remained in the $50 to $60 range. However, New Delhi still has little ability to influence the geopolitics of the Gulf, and should buffer itself for further bad news in that part of the world. India should do much more at home in terms of diversifying its energy sources, gasifying its baseload power and increasing its strategic oil reserves — the latter remain at criminally low levels. The Persian Gulf is in a slow-motion war, but in certain scenarios, its fallout on India would be instant.