Why in the News
For the first time, more than two thirds of India’s oil imports came from just three countries, Russia, the United States (US) and the United Arab Emirates (UAE), a record combined share. Official data for August 2026 show Russia’s share easing from a July high as supplies from the US and the UAE surged. American oil came at a steep premium, a price well above India’s average.
What does the concentration mean?
- What it is: Supply concentration means relying on a few sellers for most of a need, like a household buying all its groceries from three shops, so trouble at one shop hurts more.
- Limited options: The rising share of three countries shows India has limited options, few sellers it can turn to, for sourcing oil.
- Import volumes: India imported 191.2 lakh tonnes of oil in August, 10.3% less than in July.
- Import bill: The bill of $12.2 billion was nearly a quarter higher than a year earlier, because the price of oil stayed elevated.
- The takeaway: India now buys more of its oil from fewer places, so a shock to any one supplier hits harder.
How did each supplier’s share move?
- Russia still largest: Russia supplied about 44% of India’s oil in August, down from a historic high of 51% in July.
- Russian purchases: India bought 23% less Russian oil than in July but 22.5% more than a year earlier.
- US surge: Imports from the US rose to 9.7 lakh tonnes, or 5.1% of the total.
- US premium: India paid an average $810.6 a tonne for US oil against $640 across all imports. US oil has cost more than the average since June.
- UAE via alternate routes: The UAE supplied 33 lakh tonnes, or 17.4%, through alternate routes, using ports the war in West Asia has left relatively unaffected.
Why does the mix matter for India?
- US sanctions law: Washington objects to India’s Russian purchases. In September the US President signed an Act allowing tariffs, taxes on their exports to the US, of up to 100% on big buyers of Russian oil and gas such as India.
- Costly shift: Each tonne of US oil costs over a quarter more than India’s average, so shifting purchases towards the US raises the import bill.
- Russian discount faded: Russia’s share of the bill (44.5%) roughly matched its share of volumes, so Russian crude no longer came markedly cheaper than the average.
Challenges
- Concentration risk: With two thirds of supply from three countries, a sanction, war or shipping disruption at one source hurts India badly.
- Tariff exposure: The new US law can tax Indian exports to the US for continued Russian oil purchases.
- Price premium: Costlier US crude adds to an import bill already swollen by high oil prices.
- Gulf shipping risk: The West Asia war threatens the sea routes that carry much of India’s crude. Eg. The Strait of Hormuz.
Way Forward
- Wider supplier base: Oil companies should sign term contracts with producers in Africa and Latin America to cut reliance on three sellers.
- Bigger strategic reserves: The Union government should expand strategic petroleum reserves to cushion supply shocks.
- Energy in trade talks: Negotiators should link US energy purchases to tariff relief in the India US trade deal.
- Lower oil demand: Faster ethanol blending and electric mobility would reduce import dependence.
Conclusion
India’s oil sourcing has grown more concentrated just as sanctions and war narrow its choices. Whether Washington applies its new tariffs to India, and whether US oil stays costlier than the average, will shape the import mix in the coming months.
Key numbers
- Russian supply, August 2026: 84.8 lakh tonnes.
- Total imports, year on year: 3.4% above August 2025.
- US volumes: nearly 82% above July, over 130% above August 2025.
- UAE share of the bill: 16.9%.
Matching Previous Year Question
“[2025, GS2, 15 marks] “Energy security constitutes the dominant kingpin of India’s foreign policy, and is linked with India’s overarching influence in Middle Eastern countries.” How would you integrate energy security with India’s foreign policy trajectories in the coming years?”
