India's Fossil Fuel Dependence Exposed by Recurring Energy Shocks
India is facing recurring energy shocks that are driving up prices and volatility in fossil fuels. The country imports nearly 90% of its crude oil and about 50% of its natural gas, making it vulnerable to global price fluctuations.
The average Indian crude basket price swung from $63 per barrel in January to $113 per barrel with the onset of the West Asia crisis. This has resulted in a 48% increase in crude import bills for April-August compared to the same period last year, widening the current account deficit (CAD) to 1.5% of gross domestic product.
High fuel prices have a domino effect on consumer prices and macro-economic pressures. In Delhi, petrol prices rose from INR94.77 per liter in April to INR102.12 per liter in September.
The story goes beyond crude oil. Liquified Natural Gas (LNG) import volumes increased by 5.3% in April-July against last year, but the import bill rose by 24%. This is squeezing margins and raising consumer costs for gas-dependent sectors like fertilisers and city gas distribution.
Renewable energy remains India's best hedge against these recurring energy shocks. The country has already made significant progress in installing renewable energy assets and needs strategic interventions to increase renewables' share in the generation mix.