India Shifts Focus from Securing Barrels to Managing Price Volatility

India's energy security has shifted from solely focusing on securing barrels to also ensuring the price of those barrels, especially in times of global market disruptions. A recent report by Multi Commodity Exchange of India (MCX) and Vanda Insights found that India's reliance on Persian Gulf supplies, accounting for 52% of its crude and condensate imports, leaves it vulnerable to price volatility.

The report, titled 'From Fundamentals to Financial Resilience: India's Oil & Gas Market,' notes that energy weaponization is no longer an occasional phenomenon but a defining characteristic of 21st-century geopolitics. The Hormuz episode following the Russia-Ukraine and US-Iran disruptions has made clear that price volatility, not just physical scarcity, is now a key feature of India's energy security challenge.

India cannot hedge away geopolitical risk, the report states, but it can become better at managing its economic consequences through disciplined hedging. The recent West Asia crisis demonstrated the importance of physical buffers, with Indian refiners having around 190 million barrels of crude oil and petroleum products in storage, equivalent to roughly five weeks of national consumption.

However, the report highlights that physical resilience alone is not enough, as securing physical supplies does not necessarily secure their price. Even when India replaces disrupted Gulf supplies with crude from Russia, the US, West Africa, or elsewhere, those supplies remain exposed to movements in global benchmarks, freight costs, and the rupee.

Commodity exchanges can provide transparent price discovery, domestic benchmarks, and hedging instruments that help businesses manage the financial impact of sharp commodity price movements. The report emphasizes the importance of embedding disciplined hedging into corporate risk management as part of India's energy-security architecture.