In News - Saudi Arabia Oil Attacks- Implications for India

  • Tensions in the Middle East have escalated following drone attacks on two major oil facilities- Khurais and Buqayq oil fields in Saudi Arabia.
  • The strikes have destroyed about half of the crude output from the world's top exporter, five percent of the global oil supply and cut output by 5.7 million barrels per day.
  • Yemen's Houthi rebels, who have been locked in a war with a Saudi-UAE-led coalition since 2015 have claimed responsibility for the attacks.
  • But the US has accused Iran of being behind the assault, which was rejected by Tehran which said the allegations were meant to justify actions against it.

    Saudi Arabia Oil Attacks- Implications for India


  • The oil attack comes at a time when there was an increase in friction between the US and Iran after Trump withdrew from a nuclear deal between world powers and the Islamic Republic.
  • Iran has consequently restarted its uranium enrichment in violation of the 2015 nuclear accord which has created tensions in the region.
  • Saudi Arabia, a US ally, backs the Yemeni government in a brutal civil war which began in 2015.
  • Iran backs the Houthis, who hold the capital, Sanaa, and other territories in the Arab world’s poorest country.

Saudi Arabia Oil Attacks- Implications for India

What will be the implications of the attacks on India?

  • India’s strategic oil reserves can last for 12-15 days. The country also has a total installed capacity to store over 5 million tonnes of oil at three underground locations in Visakhapatnam in Andhra Pradesh and Mangalore and Padur (near Udupi) in Karnataka.
  • Adding these three underground caverns and the refineries of the country which also maintain a large stock of commercial storage India’s total oil reserves can last up to 45-60 days.
  • But due to the sudden disruption, petrol and diesel prices in India can see an upward rise. But due to India’s diverse crude oil procurement sources, it is expected that any price rise will be short-lived.
  • Saudi Aramco also has assured that there will be no immediate impact on oil supplies to India as they have adequate inventory at other places.
  • But as India is the world's third-largest oil importer and imports over 80 percent of its oil requirements, its oil import bill may increase and in turn its trade deficit
  • India's trade deficit already stood at $13.45 billion in August and the depreciating rupee is adding to the cost as Indian refiners pay for their crude imports in dollars.
  • India's fiscal deficit may also suffer due to the crisis, which has already reached 77.8 percent of the budgetary estimates in the first four months of the financial year 2019-20. Read More Articles: Saudi Arabia Says 2 Oil Tankers Damaged By Sabotage Attacks Drone Strikes On Saudi Facility Lead To Jump In Crude Prices