India Eyes Larger Crude Oil Reserves to Bolster Energy Security

India is considering a strategic shift in its energy policy by potentially requiring domestic oil refiners to maintain significantly larger crude oil inventories. This move, inspired by China’s robust stockpiling model, aims to safeguard the nation against global supply shocks and geopolitical volatility.

Lessons from China: Closing the Strategic Gap

For years, Indian policymakers believed that proximity to the Persian Gulf provided a natural buffer against supply disruptions. However, escalating tensions in the US-Iran conflict and potential disruptions in the Strait of Hormuz have challenged this assumption. Current data highlights a massive disparity between India and other major economies regarding strategic reserves.

According to the US Energy Information Administration, India held approximately 21 million barrels of strategic crude reserves at the end of 2025. In stark contrast, China maintains a massive stockpile of 1,397 million barrels, while the US holds 413 million barrels and Japan holds 263 million barrels. To bridge this gap, India is exploring a policy that would mandate refiners to hold inventories far beyond the current 15-day operational requirement.

The Massive Financial and Infrastructural Challenge

Implementing such a mandate would involve astronomical costs for both the procurement of oil and the construction of storage facilities. If the government requires refiners to hold enough crude to cover 30 days of national consumption, the scale of the requirement would be immense.

Based on India’s daily demand of approximately 5 million barrels, refiners would collectively need to maintain around 150 million barrels of crude. At current market prices and exchange rates, doubling inventory holdings could require an additional outlay of nearly Rs 60,000 crore. Furthermore, expanding storage infrastructure is a capital-intensive process that requires investing several thousand crore rupees and several years of construction time to build new tank facilities.

Industry Concerns and the Path Forward

Hoewel het doel nationale energiezekerheid is, wordt verwacht dat deelnemers uit de sector zich tegen deze maatregel zullen verzetten vanwege de zware financiële last van inkoop en infrastructuurontwikkeling. Experts uit de sector suggereren dat als een dergelijk beleid wordt ingevoerd, het raffinagebedrijven flexibiliteit moet bieden wat betreft de locatie van opslag en het commerciële gebruik van de aangehouden ruwe olie.

Er is ook een sterk advies aan beleidsmakers om de ontwikkeling van opslagfaciliteiten nabij grote havens te stimuleren. Door het model van Singapore te volgen — dat een uitgebreid opslagnetwerk benut om de belangrijkste oliehandelshub van Azië te worden — zou India de verhoogde opslagcapaciteit in een commercieel voordeel kunnen omzetten, waardoor voorraden gemakkelijk verhandeld kunnen worden op wereldmarkten.

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