India Emphasizes That Shipping Chaos, Not Supply, Is Driving High Oil Prices

Oil prices are soaring not due to a lack of supply, but because of major shipping chaos, according to India's Oil Minister Hardeep Singh Puri. Speaking to reporters at an event, Puri clarified that global oil production stands at 104 million barrels per day, but the present demand is just 94 million barrels per day. The high prices are primarily due to disrupted trade routes, increased freight costs, and other related expenses.

According to Puri, part of the supply is hindered due to the Middle East crisis and the blockade of the Strait of Hormuz. He pointed out that the Russia-Ukraine conflict initially caused some disruption, but the closure of the Strait of Hormuz has been a more significant issue. This has led to skyrocketing shipping costs worldwide as trade becomes less efficient due to longer voyages and reduced tanker availability.

India itself has suffered significantly from these disruptions. The country's crude oil import bill has skyrocketed since the Iran war disrupted Middle Eastern oil supply, pushed benchmark crude prices up, quadrupled freight rates, and increased insurance costs for a single voyage through the Strait of Hormuz to unprecedented highs.

India, being the world's third-largest crude importer, is paying much higher prices not just because of the rise in oil prices, but also due to the surge in costs to import crude from the nearest region.

To mitigate its heavy dependence on crude imports, which currently stands at 85%, India aims to increase domestic oil and gas exploration to improve its energy security. This move comes as supply disruptions continue to push energy prices higher.