Strategic reserves are extremely important for an energy dependent country. Amidst the current geopolitical uncertainty and weaponization of international energy transit routes, a strategic reserve is a quick solution to momentarily address the crisis. Other crises of similar nature are likely to occur in some form or the other. The preparation of the country is important to deal with it effectively. In such situations, a strategic reserve allows breathing space to find a quick alternative. The engine of the economy cannot run without energy. India is an energy-dependent country. It is the world’s third largest oil importer and consumer. It is heavily dependent on crude oil imports. Its development aspirations rest on uninterrupted energy supply. India’s strategic petroleum reserves (SPR) are 5.33 million metric tonnes (MMT). Its capacity is estimated to be approximately 39 million barrels of crude oil. This is India’s emergency power. The National Fuel Inventory is a strategic infrastructure that ensures energy supply during crises.
Indian Strategic Petroleum Reserves Limited (ISPRL) manages strategic crude oil storage in three underground rock caverns: Padur, Karnataka (2.50 MMT), Mangaluru, Karnataka (1.50 MMT), and Visakhapatnam, Andhra Pradesh (1.33 MMT). India has total fuel reserves to cover 74-76 days of energy. To increase capacity, the Government has approved expansion of 6.5 MMT at Chandikhole, Odisha (a new 4.0 MMT underground facility), and Padur, Karnataka (additional 2.5 MMT commercial-cum-strategic expansion).
SPR significantly helped India deal with the energy shock during the Strait of Hormuz crisis. The reserves provided significant domestic support to India to manage transient supply shocks, maintain price stability and address domestic energy market anxiety and panic. About 30% of India’s crude oil imports pass through the Strait of Hormuz. When tensions escalated in the Strait of Hormuz, the SPR provided support and space to explore alternatives. India can structurally change the path of its crude oil imports. The buffer helped India absorb Russian crude and sign contracts with alternative suppliers in the US, Latin America and West Africa. During the height of the crisis, Brent crude rose to more than $111-$119 per barrel. If India were forced to buy crude oil at exorbitant prices, it would put pressure on the Indian economy. This could have a devastating impact on retail inflation. The strategic reserve immediately acted as a sovereign buffer, preventing forced purchases of crude oil at higher prices. Emergency reserves saved India from plunging into a serious economic crisis. The government integrated SPR caverns storage with pipeline volumes and refinery operating stocks to keep the energy ecosystem resilient for 74 to 76 days. The combined formula prevented droughts at local petrol pumps. India rejected the International Energy Agency’s (IEA) call to release strategic reserves to protect its national interests. The Ministry of Petroleum and Natural Gas stressed the need to give priority to sovereign security and national interests.
Strategic reserves protect India from geopolitical conflicts, supply chain disruptions and global market price shocks. More importantly, it serves India’s national security. It temporarily prevents economic vulnerabilities caused by war, disasters, tanker strandings, fuel pump failures, shipping blockages, embargoes, supply chain disruptions, and blockages in transshipment and transit routes. This ensures that critical sectors like defence, agriculture and transport function uninterrupted. It controls domestic inflation, fiscal deficit and market volatility in emergency situations and during price increases. Its main focus is to ensure temporal stability. A strong reserve provides strategic autonomy, diplomatic breathing space and an alternative mechanism, preventing energy coercion and blockade of international transit routes by energy supplying countries.
India is the third largest importer in the world. China is the world’s largest energy importer. America is the second largest. China imports more than 11 million barrels per day (bpd) of crude oil. Despite being the world’s largest manufacturing and industrial center, it lacks the necessary energy autonomy. China’s domestic oil production cannot meet its huge demand. It has the world’s largest SPR network. Its strategic oil inventory has a capacity of 1.4 billion barrels of crude oil. Its energy reserves are the world’s largest emergency energy reserves. It is a national secret for China to disclose the exact figures of its reserves. It is also difficult to obtain accurate data from a communist country where secrecy is a state policy. It consists of a strategic reserve held by the government for national security and military emergencies and a commercial-strategic inventory for commercial purposes and secondary strategic cushions. China’s storage infrastructure includes visible above-ground tank farms and invisible military-grade networks. The latter is mostly located in ultra-secure areas below the mountains. The former is located on the sea coast near important refining complexes such as Zhoushan, Ningbo and Chengdu.
China aggressively bought cheap crude from Russia, Iran and Venezuela through 2025 to build up massive reserves. Reserves of 1.4 billion barrels would help Beijing secure energy immunity for more than 200 days, or perhaps a little longer, as it is difficult to assess the exact quality of its energy reserves. If a geopolitical crisis blocks China’s energy supply routes, it may avoid an immediate energy collapse. But this will have a serious impact on its economy, industry and manufacturing.
US crude oil import volume is approximately six to eight million barrels per day (bpd). It does not have severe energy dependence. It is one of the world’s largest domestic crude oil producers. U.S. refineries use the technology to process heavy, sour crude from West Asia and South America. US domestic crude oil production is light and sweet. Therefore, the US exports its light crude oil to foreign markets and imports its heavy crude oil for its refineries. Refining domestically produced light crude oil requires structural changes in refining engineering. However, the US enjoys its energy autonomy through domestic sources. It can reengineer to produce domestically to meet its needs. America’s SPR has a storage capacity of 714 million barrels of crude oil. It uses hollow underground salt caves for its energy reserves. They are located on the Gulf of Mexico coast – two in Texas (Bryan Mound and Big Hill) and two in Louisiana (West Hackberry and Bayou Choctaw). They are linked by oil refineries and maritime shipping channels. The refilling mandate of 2026-2027 is to aggressively restore the energy cushion. It has released 400 million barrels to counter West Asian transit blockades. An emergency release has been issued to give it as loan to commercial energy companies. It also shows how important it is for the US to secure resilient energy reserves. Therefore, energy reserves are important to deal with emergency situations.
Looking at the above comparison, China is expanding its strategic reserves by purchasing cheap crude oil from Iran, Russia and earlier Venezuela. It uses crisis situations to strengthen its energy reserves. The US tightens its grip on India by buying cheap Iranian and Russian oil, but fails to maintain the same hold on China. It helps China secure its energy storage and expand its strategic reserve. The strategic reserve ensures China’s security and crisis management in case of emergency. India should be given the opportunity to expand its strategic reserves to emerge as a competitive power in the global arena. An expanded China with its strength in energy and other critical sectors could emerge as a hegemonic power and become an obstacle to India’s progress. It may not appreciate India’s emergence as a competitive power in its immediate neighbourhood. Since strategic reserves are an important indicator of growth trajectory, it is important that India expands its strategic reserve capacity to build economic resilience, strategic defence, and geopolitical strength. Energy is Beijing’s weakness. If it is allowed to overcome its losses, New Delhi should also be allowed to buy Russian oil to expand its strategic reserves. India is a democratic country, and its emergence as a competitive power, an alternative manufacturing hub and a supply chain partner makes much more sense than letting China monopolize manufacturing and supply chains.
(Views expressed are personal)
This article is written by Jajati K Patnaik, Professor and Chairperson, Center for West Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi, and Chandan Panda, Professor, Central University of Karnataka.
