India's crude oil import bill spiked 48.4% year-on-year to $74.8 billion during the April-August 2026 period, according to data from the Petroleum Planning and Analysis Cell (PPAC). This significant increase occurred despite import volumes declining marginally by 0.4% to 100.7 million tonnes compared to 101.1 million tonnes in the same period last year. The substantial value increase reflects the impact of higher global oil prices, with the average price of Indian crude basket rising to $90.19 a barrel in August from $69.11 in August 2025. In rupee terms, the import expenditure rose 62% to over ₹7 trillion. In September specifically, the situation has deteriorated further with the Indian crude basket climbing to $115.27 a barrel on September 22 from $99.35 on September 2, as reported by PPAC. Chief Economic Adviser V Anantha Nageswaran warned that crude prices have risen 30% in a month, highlighting the accelerating cost pressures facing India. The latest surge has been even more dramatic, with India's crude oil basket hitting $123.67 per barrel on September 24, representing a 28% increase from August's $90.19 average.
A severe shortage of large oil tankers used to transport crude oil across the world's seas is pushing up the cost of bringing oil to India. Freight rates for transporting oil from the US to Asia have risen by around $26 per barrel, or approximately ₹2,300-2,400 per barrel. This means the freight cost for a single large tanker has increased by around $52 million (approximately ₹430 crore), equivalent to nearly 25% of the value of the total oil carried by the vessel. The problem extends beyond US routes, with shipping costs from Gulf countries to India surging from $10.6 to $61.9 per tonne between February and September 2026. Meanwhile, Russian oil transport costs have reached $20-$23 per barrel, eliminating the deep discounts India previously received from Russian crude. The recent rise in crude prices has been fuelled by concerns over supply disruptions amid the ongoing West Asia conflict, with attacks on Saudi Arabia's East-West pipeline disrupted shipments through the Red Sea and tensions around the Strait of Hormuz raised concerns over Gulf crude availability.
The tanker shortage crisis has been caused by multiple geopolitical factors converging simultaneously. The war between the US and Iran, which began in February 2026, has made shipping through the Strait of Hormuz increasingly risky, as around 20% of the world's oil and nearly 45% of India's oil requirement passes through this narrow maritime route. Meanwhile, Yemen's Houthi fighters have been attacking ships in the Red Sea, while Saudi Arabia's main pipeline was attacked on September 11, forcing oil companies to rely heavily on tankers and creating sudden surge in demand. Following sanctions on Russia, tankers carrying Russian oil have been separated from regular trade and formed what is known as the 'shadow fleet', with around 20% of the world's tankers caught up in this system. The International Energy Agency (IEA) warned on September 18 that renewed hostilities had caused further disruptions to regional oil exports, adding to market uncertainty. The US passed the 'Graham Act' on September 18, 2026, proposing tariffs of up to 100% on countries buying Russian oil.
Elevated energy prices are invariably finding their way into the broader cost structure of the economy, according to Crisil Intelligence. Under conditions of robust demand, producers are increasingly able to pass on higher fuel and input costs to consumers, a trend evident in near-double-digit wholesale price inflation of 9.9% in August. India is the world's third-largest importer of crude, meeting more than 88% of its needs through imports, with India importing around 88.1% of its crude oil requirements during April-August. The higher energy bill is also impacting India's trade balance, with petroleum imports accounting for 22.5% of India's total merchandise imports during April-August, up from 19.5% a year earlier. The merchandise trade deficit widened to $147.1 billion from $123.9 billion during the period. The current account deficit stood at $4.2 billion, or 0.5% of GDP, in the first quarter of FY27, compared with $3.4 billion, or 0.4% of GDP, a year earlier. S&P Global Energy expects crude to remain broadly in the $80-100 range through 2027, with Brent averaging around $90 or higher for the remaining 2026.
Despite the challenging conditions, the Petroleum Ministry has assured there is no need for panic, stating that India has oil stocks sufficient for around 60 to 69 days of its requirements, while the country's refineries are operating at full capacity. To reduce dependence on any single country or route, India has increased the number of countries it buys oil from to 41 countries from 27, including the US, Brazil, Iraq and African nations. However, Petroleum Minister Hardeep Singh Puri has said oil companies are suffering losses of around ₹1,000 crore every day. The current problem represents a rising cost of transporting oil rather than a shortage of oil in the country, but if maritime tensions and the tanker shortage continue for a prolonged period, they could affect household budgets and the prices of everyday goods in the coming days. Chief Economic Adviser V Anantha Nageswaran emphasized that India needs resilience, not just self-reliance, adding that the country should aim for 'diversified abundance' rather than isolation.
