Crude oil imports & Effects

 (Q1) How much crude does India consume?

India is the 3rd largest consumer of Oil at 5.35 million barrels per day (MBPD) behind US (21.2mbpd) and China (15.1mbpd)

India imports nearly 85% of its total Crude oil consumption every year. 

India's own production has been below 700,000 barrels per day for a long time.

(Q2) Where does India import the balance requirement from?

India imports oil in the following share as per FY 21 numbers: 

Iraq 17%, 

Saudi Arabia 16%, 

UAE 14%, 

USA 9%, 

Qatar 8%, 

Others 38%

India import share for Oil from Russia is under 2%, an insignificant number.

(Q3) How does India's Oil trade deficit look like?

Definition: Oil imports - Oil Exports = Oil trade deficit 

India imports about 290 Million tones of Oil in a year. 

Assuming that Oil prices are at $75 (last year), India's oil import bill is ~ $165bn (290m * $75)

India exports refined petroleum products as well. At $75 oil price those exports would amount to $58bn

Oil trade deficit at crude $75 (Imports - Exports) = 165 - 58 = $105bn

Oil at $100, India's oil trade deficit would be ~ $140bn

(Q4) How does India's total Goods Trade Deficit look like?

Definition: A current account deficit occurs when a country sends more $ abroad than it receives from abroad

Total Goods Trade deficit -240bn

NRI's remitting money + 80bn (NRI's sending money to India)

Net services surplus +110bn (for ex - IT companies exporting services)

Primary income -38 

Total, Current account deficit: -$88bn

No. India gets the below $ inflows as well though 'Finance & Capital Accounts',

$45bn in FDI

$10bn in FPI

$25bn in loans it takes in $

Total = $85bn

Current Account Deficit is roughly -$88bn which is balanced by $85bn received though Finance & Capital Accounts & hence when Crude is roughly $100, India can manage.

(Q7) What happens when Oil prices spiral beyond $100?

For every $10 rise the trade deficit rises by $15bn

Almost all the other heads do not move as quickly as oil deficit can. In that scenario it can become a direct headwind for India.

BUT, MOST Important point: Oil has to be at or above $100 for 12 months for this impact in numbers

(Q8) Any other impact of rising crude?

Inflation: For every $10 rise in Oil it adds 90bps to wholesale inflation and about 25bps to consumer inflation in India over a 12 month period

During a market correction, India can see FPI outflows which adds stress

(Q9) What now?

In case Oil prices trade above $100 for a few weeks and revert back below pre-conflict levels of $90, India will have minimal impact

If Oil stays above $100 or say $120 for even 3 months or more, India's external situation will deteriorate

(Q10) How does the crisis gets baked into the markets?

If there is a de-escalation / ceasefire, the Russian Oil & Gas will slowly come back to market and Oil prices will cool.

With a cushion of $635bn in FX reserves India can withstand short term volatility quite well but this ability can get challenged if Oil prices keep rising.

On the contrary, if this situation normalizes India stands to benefit a lot more than its peers.

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