/ground-report/media/post_banners/wp-content/uploads/2023/11/Source-Canva-41.jpg)
While India has made significant strides in transitioning to renewable energy, it still heavily depends on fossil fuels. As the world’s third-largest oil consumer, India imports 85% of its oil supply, making it susceptible to market volatility.
Approximately 60% of India’s oil originates from the Middle East, implying that any instability in that region could significantly impact oil production and global oil prices. The ongoing Israel-Hamas conflict in Gaza is a prime example of a crisis that could destabilize oil production.
India-Israel alliance, Gulf trade impact
India’s close alliance with Israel could potentially affect its trade relations with Arab nations and jeopardize oil imports. However, India’s vast consumer market might protect against any severe measures by the Gulf oil states.
Around 70% of India’s public sector refineries’ oil import is through term contracts while the rest are spot purchases. This means while supply is ensured, price and other conditions favor the sellers.
The duration of any conflict becomes crucial too. If the war does not continue beyond the duration of India’s term contracts with suppliers, everything should be fine. But if the Gaza conflict drags on like the Russia-Ukraine war, India might need to generate import alternatives, although it would have time on its side.
India’s strategic petroleum reserve has enough crude oil supply for just 9.5 days. Private companies, on the other hand, have a cumulative reserve capacity of 64.5 days.
Many countries have their own strategic reserve plans to secure energy supplies in a crisis. The US has the world’s largest reported reserve capacity of 727 million barrels which roughly amounts to 60 days of supply. China has 475 million barrels and Japan 324 million barrels.
The international energy agency, which India joined as an associate member in 2017, requires all members to maintain an emergency oil reserve that they can release to stabilize prices in the event of any oil shocks.
India and Israel’s bilateral trade and economic relationship began in 1992 and is now worth about USD$11 billion. India is Israel’s second-largest trade partner in Asia with USD$8.4 billion of exports and USD$2.3 billion of imports in 2022-23. Thus, any long-term conflict could be detrimental to the Israeli economy and therefore India’s balance of payments.
Abraham Accords benefit India's diplomacy
The Abraham peace accords, signed by Israel, the United Arab Emirates, and Bahrain in September 2020, have opened doors for India to many multilateral agreements with other nations. India and Israel are also part of the I2U2 group, along with the UAE and US. This group focuses on joint investments and cooperation in areas such as water, energy, transport, space, health, and food security.
In September 2023, at the G20 meet in New Delhi, a memorandum was signed between India, the US, Saudi Arabia, UAE, France, Germany, and Italy to develop the 'India-Middle East-Europe Economic Corridor’ (IMEEC). This corridor would connect Mumbai and Gujarat port with the UAE through a shipping route and then a rail network connecting UAE, Saudi Arabia, Jordan, and Israel. The corridor could significantly enhance regional energy security.
However, geopolitical issues like war can affect energy security. In such cases, diversifying energy supply alternatives is a more realistic strategy. The Gaza war puts all such multilateral initiatives under strain.
In its policy making, India has been focusing on decarbonisation. Evidence for this includes India's nationally determined contributions, the Net Zero announcement at COP 26, the formulation and implementation of EV policies, and the establishment of the Bureau of Energy Efficiency (BEE) to promote renewable power and energy efficiency.
India's energy transition faces challenges
However, due to the inherent variability in generation of renewable energy, complete reliance on solar, wind and others to meet India’s huge and increasing demand for power seems far-fetched. Energy transition also faces other challenges in India. The major one is India’s dependency on China for renewable technologies and related important raw materials (such as rare earth materials).
Without indigenous technology development, the transition to renewable energy will merely transfer India’s dependence on oil sourced overseas to a dependence on renewable technologies and raw material from overseas.
However, a focus on green hydrogen and cross border electricity trade (CBET) could address those issues. While green hydrogen technology is still in its infancy, CBET is already taking place with Bangladesh, Bhutan and Nepal. But reaping full potential benefits of CBET requires significant infrastructure development and various other cross border common regulations.
Given all these challenges, we would not expect a short- or medium-term geopolitical disturbance like Gaza to influence the momentum of India's energy transition. However, India will definitely follow its own decarbonisation pathway.
Saswata Chaudhury is a Senior Fellow, The Energy and Resources Institute (TERI), New Delhi. Sanchit S Agarwal is an Associate Fellow, TERI.
This content is originally published under the Creative Commons license by 360info™. The Ground Report editorial team has made some changes to the original version.
Keep Reading
- 3.7 litres of water used to make one cigarette
- What makes Oman’s Yiti a sustainable city?
- Clean energy manufacturing market to reach $790B by 2030: IEA
Follow Ground Report for Climate Change and Under-Reported issues in India. Connect with us on Facebook, Twitter, Koo App, Instagram, Whatsapp and YouTube. Write us on [email protected].
