Focus: GS-II International Relations

Why in news?

India is moving to store oil in the US, and this is the first time India is creating an emergency reserve abroad.

Details, and why?

  • India, the world’s third largest oil consumer, is looking to take advantage of low prices and guard against possible supply disruptions.
  • India and U.S. have signed MoU to begin co-operation on strategic petroleum reserves.
  • We are also in an advanced stage of discussion for storing crude oil in US strategic petroleum reserve to increase India’s strategic oil stockpile.
  • The issue of who or how much oil will be brought for storage is still open. State-run refiners, which has term contract for US oil, could buy the oil.

Two Options

  • First one is to lease caverns with crude stockpile for a specific period of time when prices are low.
  • The second one is to lease capacity and buy oil separately as and when prices drop to a level expected to yield handsome arbitrage later.


  • The move comes amid India’s deadly border stand-off with China in Ladakh and signals of New Delhi and Washington deepening their strategic bonding beyond defence.
  • The US has emerged as India’s 6th largest oil supplier since 2017.

Diversifying India’s Oil Imports

  • India’s imports of Middle Eastern oil plunged to a four-year low in 2019.
  • India imports about almost 85% of its oil needs and traditionally relies on the Middle East for the majority of its supplies, however, the region’s share of India’s crude shrank to 60% in 2019.
  • The reason being: a record output from the United States and countries like Russia offered opportunities for importers to tap other sources.

-Source: Times of India

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