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Oil prices are high not because the world is short on oil but because the trade routes have been severely disrupted, driving up freight and other costs, India’s Oil Minister Hardeep Singh Puri said.
“There's no supply shortage in the world. The world has 104 million barrels of oil a day. It's only that the supply routes are choked and freight charges and others are high, and that's higher prices,” Puri told reporters on the sidelines of an event, as carried by Indian media.
Currently, global oil consumption is running below available supply, as demand is now 94 million barrels per day (bpd), versus 104 million bpd of supply, the Indian minister said.
However, a part of this supply cannot easily reach consumers due to the Middle East crisis and the disruptions at the Strait of Hormuz, according to the Indian official.
“When the Russia-Ukraine conflict started. That was one point. Then the next point was more serious when the Strait of Hormuz was closed,” Puri said.
Shipping costs on all global sea lanes are skyrocketing as trade becomes less efficient amid re-routes, longer voyages, and falling tanker availability.
India, specifically, has seen its crude oil import bill soar since the Iran war choked Middle Eastern oil supply, raised benchmark crude prices, quadrupled freight rates, and boosted insurance on a single Strait of Hormuz voyage to never-before-seen highs.
India has been paying elevated prices to import Middle Eastern crude not only because of the spike in oil prices, but also due to the surging costs to bring supply from the nearest region from which it can import crude.
To reduce its outsized 85% reliance on crude imports, India, the world’s third-largest crude oil importer, looks to boost domestic oil and gas exploration to enhance its energy security amid supply disruptions that drive energy prices higher.
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