India seeks inspiration from China to tackle possible supply disruption in future

US-Iran war: India is reportedly mulling ways to protect the country against future supply disruptions like those caused by the Iran war. And it’s taking inspiration from China. 

China makes domestic refiners maintain significantly larger crude oil inventories. India is reportedly considering a similar policy, as mentioned in a report in The Economic Times. The stockpile will be additional to the roughly 15 days of crude oil currently held by refiners for operational needs. As per the report, the plan is still in its early stages. 

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But it's not as simple as it seems. While the idea might seem the most appropriate considering the West Asia conflict, it would involve high costs required to build extra storage facilities and purchasing more crude oil. 

Doubling inventory levels to cover about 30 days of national demand would require holding around 150 million barrels of crude, based on India’s daily consumption of 5 million barrels. At current oil prices and exchange rates, refiners may need to spend about ₹60,000 crore on crude oil alone to double their stocks, the report added. Additionally, several thousand crore rupees would be needed to construct new storage tanks, a process that could take years, it further added.

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A source familiar with refiners’ views said any policy should allow companies flexibility in choosing storage locations and how to trade the crude held. 

Meanwhile, US President Donald Trump said that after the breakthrough in the US-Iran peace pact, commercial vessels and oil tankers have begun moving out of the Strait of Hormuz, and heading towards the Southern Highway.