India Remains Dependent on Imports for 90% of Oil Needs

Crude oil (tracked by the United States Oil Fund, USO) traded at 127.61 dollars on August 12, up 1.34% for the session and sitting comfortably within its 52 week range of 102.42 to 142.33. The move comes as fresh industry data underscores just how deeply India remains dependent on foreign crude, even as its broader energy mix slowly diversifies.

What the Numbers Show

A joint report from the Confederation of Indian Industry and EY found that India's overall dependence on primary energy imports slipped from 47% in fiscal year 2017 to 42% in fiscal year 2025. That is a meaningful shift for a country of India's size, pointing to gradual gains in domestic energy sourcing across coal, gas and renewables.

Crude oil tells a starker story. Roughly 90% of India's oil demand is still met through imports, a figure that has barely budged even as other parts of the energy system have loosened their reliance on outside supply. India is the world's third largest crude importer, and domestic production has been sliding for three straight years, leaving refiners with little choice but to keep buying abroad.

Why India Remains Dependent on Overseas Barrels

The gap between falling output and rising consumption explains why India remains dependent on imported crude despite years of policy efforts aimed at energy security. Demand keeps climbing with economic growth, while ONGC and other domestic producers have struggled to lift extraction meaningfully. That mismatch forces refiners to look outward, and increasingly, toward suppliers willing to offer discounted or steady volumes.

Geopolitics has sharpened the problem. The conflict involving Iran and the disruption of flows through the Strait of Hormuz pushed Indian refiners to scramble for substitutes when Middle Eastern supply grew uncertain. Russia stepped into that gap, with Indian purchases of Russian crude hitting record levels as buyers sought cheaper, more available barrels. State refiners have also leaned harder on West African suppliers to fill the void left by Middle East disruptions.

Storage Gaps and Strategic Reserves

India's exposure to supply shocks is compounded by thin storage capacity. The country's current strategic and commercial reserves can cover only about eight days of national demand, a slim buffer for an economy so reliant on imported barrels. ONGC plans to build a new storage facility at Mangaluru capable of holding roughly 13 million barrels, part of a broader push to cushion the next disruption before it hits.

Reading the Price Action

USO's 1.34% gain and RSI reading of 55.17 suggest the market is neither overbought nor oversold, holding a fairly neutral technical posture even as headlines about Indian demand and supply routing shift week to week. Prices remain well below their 52 week high of 142.33, reflecting a market still weighing ample global supply against pockets of geopolitical risk tied to the Middle East and shipping chokepoints like the Bab el Mandeb.

Can India Narrow the Gap

Building storage and diversifying suppliers helps at the margins, but closing a 90% import dependence gap requires either a rebound in domestic output or a structural shift in demand growth, neither of which looks imminent. For now, India's crude strategy is less about independence and more about spreading risk across more sellers and more barrels in reserve.

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