India Weighs Larger Crude Oil Inventories to Bolster Energy Security

As geopolitical tensions in the Middle East escalate, India is considering a major strategic shift to protect its energy interests. Policymakers are exploring a new mandate that would require domestic refiners to maintain significantly larger crude oil stockpiles, drawing direct inspiration from China’s massive reserves.

Learning from the China Model

For years, Indian policymakers operated under the assumption that the country’s proximity to the Persian Gulf provided a natural buffer against supply disruptions. However, recent volatility stemming from the US-Iran conflict and potential threats to shipping routes through the Strait of Hormuz have challenged this belief.

The scale of the proposed shift is highlighted by a stark comparison in reserve capacities. According to US Energy Information Administration data, India’s strategic crude reserves stood at approximately 21 million barrels at the end of 2025. In contrast, China maintains a colossal 1,397 million barrels, while the US and Japan hold 413 million and 263 million barrels, respectively. To close this gap, India may move beyond the current industry standard of holding roughly 15 days of operational inventory.

The Financial and Infrastructure Challenge

Transitioning to a more robust reserve system presents a massive financial hurdle for the Indian refining sector. If the government mandates that refiners hold enough stock to cover 30 days of national consumption, the collective requirement would jump to approximately 150 million barrels, based on India’s daily demand of 5 million barrels.

The economic implications are twofold:

Seeking Flexibility and Strategic Storage

Industry participants have expressed concerns regarding the implementation of such a policy. To mitigate the impact on refiners, experts suggest that any new mandate must allow for flexibility in where storage is located and how that oil is commercially utilized.

There is a growing call for policymakers to incentivize the development of storage facilities near major ports. By mirroring Singapore’s successful model—which utilizes an extensive storage network to become Asia’s premier oil-trading hub—India could transform its strategic reserves into a commercial asset. This would allow inventories to be easily traded in global markets, balancing national security with economic efficiency.

Key Takeaways