The 'backup' option for Asian countries is running out, will oil become expensive

Amid rising tensions in the Middle East, backup crude oil options are dwindling. Energy supplies to countries like China and India are under threat. This could result in a surge in petrol and diesel prices and a rise in inflation.

Hormuz Risk Rising: The 'backup' option for Asian countries is running out, will oil become expensive in India?

The Strait of Hormuz has been closed since tensions began between the US, Israel, and Iran on February 28th. It is a major waterway through which approximately 20% of the world's oil and gas passes. India imports approximately 80% of its oil and gas through this route. Since the tensions began, Asian countries, including India, have begun to resort to alternative options. They have increased purchases from countries like Russia, but now even backup options are becoming scarce.

India increased purchases from Russia and Iran after US exemption

Following the closure of the Strait of Hormuz, the US temporarily relaxed restrictions on purchasing oil from Russia, prompting countries like India and China to begin purchasing oil from Russia and Iran. Asian countries' backup options are also nearly identical, so the growing competition for purchases is narrowing their options. Following rising tensions in the Middle East, countries like India and China are looking for alternative supplies. They were trying to manage the situation through strategic means, but these options are running out as additional Russian supplies are being exhausted. Anoop Singh, global head of shipping research at Oil Brokerage Ltd., says that in February, the crude oil available in floating storage was around 20 million barrels, but now it has fallen to less than 5 million.

Petrol and diesel prices are expected to rise due to reduced supply

If tensions in the Middle East don't subside soon and India's other options dwindle, the country could see a rise in petrol and diesel prices in the near future. Many market experts have even expressed apprehension that, with elections currently underway in some states, the government may increase the prices of petrol, diesel, and LPG.

Update on the Strait of Hormuz

The US has announced an extension of the ceasefire with Iran, but the blockade of Iranian ports remains in place. Reports have also emerged that Iran has attacked ships even during this ceasefire, raising the possibility of further escalation of tensions. Keep an eye on whether petrol and diesel prices will rise in India, the tensions in the Strait of Hormuz, and Russia. The availability of other suppliers and the level of competition will determine whether the common man will have to pay higher prices for petrol and diesel in the future.