India’s Rise as a Global Power Depends on Energy Security

July 1, 202624 Views

As geopolitical tensions continue to disrupt global energy supply chains, India’s dependence on imported crude oil has emerged as one of its most significant strategic vulnerabilities. A recent study argues that expanding the country’s Strategic Petroleum Reserves is no longer merely an economic necessity but a national security imperative for sustaining long-term growth and safeguarding India’s aspirations of becoming a global power.

By Sanjeev Oak

India today stands at a defining moment in its economic journey. With the ambition of becoming a $5 trillion economy, an expanding manufacturing base, unprecedented investment in infrastructure, and growing industrial capacity, the country is laying the foundations of long-term economic transformation. Yet, beneath these ambitions lies a reality that receives far less public attention. No economy, regardless of its size or technological capability, can sustain rapid growth without secure, affordable, and uninterrupted access to energy. Energy security, therefore, is no longer merely a sectoral concern. It has become an indispensable pillar of economic policy, national security, and foreign affairs.

“No economy, regardless of its size or technological capability, can sustain rapid growth without secure, affordable, and uninterrupted access to energy.”

India’s greatest vulnerability stems from its overwhelming dependence on imported crude oil. Nearly 85 percent of the country’s crude oil requirement is met through imports, leaving the economy highly exposed to geopolitical shocks and volatility in international energy markets. Conflicts in the Middle East, the prolonged Russia-Ukraine war (which escalated in February 2022), production cuts by OPEC+ (notably intensified since late 2022), attacks on commercial shipping in the Red Sea (beginning in November 2023), and periodic tensions around the Strait of Hormuz have repeatedly demonstrated how quickly global energy markets can be disrupted. Every such crisis reminds India that energy has become as much a strategic asset as an economic commodity.

The consequences of such disruptions extend well beyond higher fuel prices. A sharp increase in crude oil prices inflates India’s import bill, widens the current account deficit, exerts pressure on the rupee, and places additional strain on foreign exchange reserves. The impact quickly spreads across the economy through higher transportation costs, rising fertilizer prices, increased electricity generation costs, and costlier industrial production. Inflation accelerates, consumer demand weakens, and economic growth comes under pressure. Crude oil, therefore, is not merely an imported commodity; it is one of the principal determinants of India’s macroeconomic stability.

It is against this backdrop that the recent report by global consulting firm Ernst & Young (EY), released in early 2024, assumes considerable significance. The report argues that India must accelerate the expansion of its Strategic Petroleum Reserves (SPR) if it is to protect its economy against increasingly frequent geopolitical disruptions. As India’s energy demand continues to grow and global uncertainties become more pronounced, the country’s present reserve capacity may no longer provide an adequate buffer during prolonged supply crises.

Strategic Petroleum Reserves are emergency stockpiles of crude oil maintained to ensure continuity of supplies during wars, geopolitical conflicts, natural disasters, or major disruptions in international energy markets. Recognizing this strategic necessity, India launched its Strategic Petroleum Reserve program in 2004. Underground storage facilities with a combined capacity of 5.33 million metric tons were subsequently established at Visakhapatnam, Mangaluru, and Padur, and are managed by Indian Strategic Petroleum Reserves Limited (ISPRL).

These facilities marked an important step in strengthening India’s energy preparedness. However, the country’s economic growth has significantly outpaced the expansion of its strategic reserves. At present, India’s Strategic Petroleum Reserves can meet only about nine and a half days of crude oil demand. Even after adding the commercial inventories maintained by oil marketing companies, the country’s total emergency reserves provide coverage for only about 74 days.

This falls short of the benchmark recommended by the International Energy Agency (IEA)—established in 1974 in the wake of the global oil crisis—which advises countries to maintain emergency oil stocks equivalent to at least 90 days of net imports. Although India is not a full member of the IEA, the recommendation carries considerable weight for a nation that has become the world’s third-largest importer of crude oil. As India’s economy continues to expand, narrowing this gap will become increasingly important, not merely to ensure uninterrupted energy supplies but also to strengthen economic resilience during periods of global instability.

The challenge is likely to become even more pressing over the coming decades. According to several international energy agencies, India’s demand for crude oil will continue to rise as industrialization accelerates, cities expand, vehicle ownership increases, aviation grows, and the petrochemical industry continues to develop. While India has emerged as a global leader in renewable energy, solar power, green hydrogen, and electric mobility, the transition to cleaner sources of energy will inevitably be gradual. Critical sectors such as freight transportation, aviation, shipping, defense, heavy manufacturing, and petrochemicals will continue to depend heavily on petroleum for many years.

“Building larger and more resilient Strategic Petroleum Reserves is not merely an energy policy; it is an investment in India’s long-term economic sovereignty.”

This makes Strategic Petroleum Reserves far more than emergency stockpiles. They are a strategic insurance policy against external shocks. Countries with adequate reserves possess the flexibility to moderate domestic fuel prices, avoid panic buying in volatile markets, and shield their economies from temporary supply disruptions. Those with inadequate reserves are often compelled to purchase expensive crude precisely when international prices are at their highest.

For India, therefore, the debate is no longer simply about energy security. It is about strategic economic autonomy. A nation aspiring to emerge as a leading global economic and strategic power cannot allow its growth trajectory to be dictated by events beyond its borders. Building larger and more resilient Strategic Petroleum Reserves is not merely an energy policy; it is an investment in India’s long-term economic sovereignty.

Building India’s Strategic Energy Shield

Leading economies have long recognized that energy security is inseparable from national security. The United States, Japan, South Korea, and China have consistently treated Strategic Petroleum Reserves not as emergency stockpiles alone, but as strategic national assets capable of protecting their economies during periods of geopolitical uncertainty.

The United States has repeatedly drawn upon its Strategic Petroleum Reserve—created in 1975—to stabilize domestic fuel markets and ease pressure on global oil prices during supply disruptions. China, meanwhile, has spent more than two decades systematically expanding its reserves while simultaneously diversifying its sources of crude oil imports. Japan and South Korea, despite having virtually no significant domestic hydrocarbon resources, have invested heavily in strategic reserves to ensure uninterrupted supplies during crises.

The lesson for India is unmistakable. The difference between these countries and many energy-importing economies lies not merely in the size of their reserves but in the strategic flexibility those reserves provide. Countries with substantial emergency stocks can moderate domestic fuel prices, reduce inflationary pressures, reassure financial markets, and avoid panic buying when international prices surge. Nations with inadequate reserves, on the other hand, often become price takers, compelled to purchase expensive crude precisely when global markets are at their most volatile.

For a country aspiring to become a $5 trillion economy, and eventually one of the world’s leading economic powers, such vulnerability carries significant strategic risks. Energy security is no longer simply about ensuring uninterrupted supplies. It is about preserving economic stability, protecting industrial production, and maintaining strategic autonomy during periods of international uncertainty.

Yet strategic reserves represent only one pillar of a comprehensive energy security strategy. The second is the diversification of crude oil imports. Over the past decade, India has consciously broadened its sourcing beyond its traditional suppliers in West Asia. Alongside long-standing partnerships with Saudi Arabia, the United Arab Emirates, and Iraq, India has substantially increased crude imports from Russia (particularly following the geopolitical shifts of 2022), while also expanding purchases from the United States, Brazil, Guyana, and several African producers. This diversification has reduced excessive dependence on any single supplier or region and strengthened India’s resilience against geopolitical disruptions.

“Diversification and strategic reserves must work together as complementary pillars of India’s long-term energy security policy.”

However, diversified sourcing alone cannot eliminate supply risks. Maritime chokepoints such as the Strait of Hormuz, the Bab el-Mandeb Strait, and the Red Sea remain vulnerable to conflict and disruption. Nearly every major geopolitical crisis over the past decade has highlighted how quickly global energy supply chains can be affected by regional instability. Consequently, diversification and strategic reserves must work together as complementary pillars of India’s long-term energy security policy.

Expanding Strategic Petroleum Reserves, however, requires substantial financial commitment. Developing underground storage caverns, specialized engineering infrastructure, pipeline connectivity, terminal facilities, and long-term maintenance systems demands significant capital investment. Financing such projects entirely through government expenditure may prove increasingly difficult at a time when public resources are simultaneously required for infrastructure, healthcare, education, defense, and social development.

Recognizing this challenge, the Ernst & Young (EY) report recommends expanding the use of the Public-Private Partnership (PPP) model. Greater participation by domestic and international investors would reduce the fiscal burden on the government while accelerating project execution. Such partnerships could also bring advanced technologies, operational expertise, and global best practices in storage management and logistics.

Nevertheless, private participation must be supported by a robust regulatory framework. Strategic Petroleum Reserves exist primarily to protect national interests during emergencies. Commercial efficiency should therefore complement, rather than compromise, their strategic purpose. Transparent governance, clear operational guidelines, and strong regulatory oversight will be essential to ensure that commercial participation strengthens rather than weakens India’s energy security architecture.

The Government of India has already begun moving in this direction. In July 2021, the Union Cabinet approved the second phase of the Strategic Petroleum Reserve program, which includes the construction of an additional 6.5 million metric tons of storage capacity at Chandikhol in Odisha and Padur in Karnataka. Once completed, these facilities will substantially enhance India’s emergency preparedness and provide a stronger buffer against prolonged disruptions in global crude oil supplies.

Even this expansion, however, should be viewed as another milestone rather than the final destination. India’s energy demand is projected to rise steadily over the coming decades as manufacturing expands under the Make in India initiative (launched in September 2014), freight movement increases, urbanization accelerates, aviation traffic grows, and industrial production continues to diversify. Strategic reserve planning must therefore remain dynamic, evolving in line with future demand instead of reacting only after crises emerge.

Investment in Strategic Petroleum Reserves also generates benefits that extend well beyond energy security. Large-scale storage projects stimulate investment in advanced engineering, underground construction, logistics, pipeline networks, port infrastructure, digital monitoring systems, and energy management technologies. They create skilled employment, strengthen industrial capabilities, and improve the resilience of India’s broader energy ecosystem.

For these reasons, expenditure on Strategic Petroleum Reserves should not be viewed as a fiscal burden. It is an investment in national infrastructure, industrial continuity, and long-term economic resilience. Just as highways, ports, airports, and power grids underpin economic growth, strategic energy reserves provide the stability required to sustain that growth during periods of global uncertainty.

In an increasingly fragmented geopolitical environment, where supply chains are becoming more vulnerable and energy markets more unpredictable, India’s energy strategy must extend beyond securing adequate daily supplies. It must focus equally on building the resilience required to withstand future crises. Expanding Strategic Petroleum Reserves, diversifying crude oil imports, and strengthening energy infrastructure are therefore not isolated policy initiatives. Together, they form the strategic shield that will protect India’s economy as it advances toward becoming a leading global power.

From Strategic Reserves to Strategic Power

One of the most significant recommendations of the Ernst & Young (EY) report is the calibrated commercial utilization of India’s Strategic Petroleum Reserves. Traditionally, these reserves have been treated as emergency stockpiles, to be used only during wars, major supply disruptions, or natural disasters. However, the changing dynamics of global energy markets have encouraged several countries to adopt more flexible models that combine strategic preparedness with economic efficiency.

The report suggests that India should take advantage of cyclical movements in global crude oil prices by purchasing oil when prices are relatively low and storing it in its strategic reserves. During periods of elevated prices, a limited quantity of these reserves could be supplied to domestic oil companies, enabling the government to recover part of the storage and maintenance costs while preserving adequate emergency inventories. Such a strategy would convert Strategic Petroleum Reserves from passive storage facilities into actively managed strategic assets.

The Government of India has already taken a step in this direction by permitting Indian Strategic Petroleum Reserves Limited (ISPRL) to commercially utilize nearly 30 percent of its storage capacity. If implemented with prudence and transparency, this approach can improve operational efficiency and reduce maintenance costs without compromising the country’s emergency preparedness. At the same time, commercial considerations must never dilute the primary objective of Strategic Petroleum Reserves. Their foremost purpose remains safeguarding India’s energy security during periods of severe geopolitical or supply disruptions. Achieving the right balance between commercial optimization and national security will therefore be critical.

The discussion, however, extends far beyond petroleum storage. In the twenty-first century, energy security has become inseparable from foreign policy, maritime security, defense planning, economic stability, and supply chain resilience. Every major geopolitical crisis in recent years has underscored this reality. Whether it was the Russia-Ukraine conflict, tensions in the Middle East, attacks on commercial vessels in the Red Sea, or recurring instability around the Strait of Hormuz, each event exposed the vulnerability of nations that depend heavily on imported energy.

For India, these developments carry profound strategic implications. Nearly two-thirds of the country’s crude oil imports pass through some of the world’s most sensitive maritime routes. Any prolonged disruption in these sea lanes could have immediate consequences for industrial production, transportation, inflation, and economic growth. Energy security, therefore, cannot be viewed independently of maritime security. Protecting shipping lanes, strengthening naval capabilities, expanding strategic reserves, and diversifying import sources are all interconnected components of a comprehensive national security strategy.

“Energy security cannot be viewed independently of maritime security. Protecting shipping lanes, strengthening naval capabilities, expanding strategic reserves, and diversifying import sources are all interconnected.”

India’s long-term energy policy must also recognize that the transition toward cleaner sources of energy will be gradual rather than immediate. The country has made remarkable progress in expanding renewable energy capacity, promoting solar power, investing in green hydrogen, and encouraging electric mobility. These initiatives will undoubtedly reshape India’s energy landscape over the coming decades. Nevertheless, petroleum will remain indispensable for aviation, shipping, defense, heavy manufacturing, petrochemicals, and freight transportation for the foreseeable future. Until alternative technologies achieve large-scale commercial viability, crude oil will continue to underpin the functioning of the Indian economy.

Consequently, Strategic Petroleum Reserves should be viewed as one pillar of a broader national energy strategy. Equal attention must be devoted to expanding domestic exploration, increasing refinery capacity, modernizing pipeline networks, strengthening port infrastructure, securing overseas energy assets, diversifying import partners, and accelerating the transition toward cleaner fuels. Together, these initiatives form the five pillars of India’s long-term energy security architecture. No single policy can guarantee energy security. It is the combined strength of these complementary measures that will determine India’s resilience in an increasingly uncertain world.

Ultimately, the strength of a nation aspiring to global leadership is measured not only by the size of its economy, the sophistication of its military, or the pace of its technological advancement. It is equally measured by its ability to withstand external shocks without compromising economic stability or national interests. Countries that possess secure energy systems enjoy greater strategic autonomy, stronger macroeconomic resilience, and enhanced diplomatic flexibility. Those that remain dependent on volatile international markets often find their policy choices constrained by events beyond their control.

The expansion of India’s Strategic Petroleum Reserves should therefore be regarded not as an expenditure but as a strategic investment in economic sovereignty. It strengthens industrial continuity, protects consumers from extreme price shocks, reassures financial markets, and equips policymakers with valuable flexibility during international crises. The returns on such investments cannot always be measured in financial terms; they are reflected in national resilience and strategic confidence.

As India advances toward becoming one of the world’s leading economic and strategic powers, energy security must occupy the same place in national planning as defense preparedness and economic reform. Every great power in modern history has recognized that sustained prosperity depends upon secure access to energy. India will be no exception.

In an era defined by geopolitical competition, fragile supply chains, and recurring energy disruptions, expanding Strategic Petroleum Reserves, modernizing energy infrastructure, encouraging responsible private participation, and pursuing diversified energy partnerships are no longer optional policy choices. They are strategic imperatives.

India’s journey toward great power status will not be determined solely by the size of its economy or the strength of its armed forces. It will also depend on the resilience of the systems that sustain both. Among those systems, none is more fundamental than energy.

“Energy security is, ultimately, national security. And recognizing that reality today will lay the strongest foundation for India’s emergence as a global power tomorrow.”