Stories
West Asia War Triggers Global Oil Supply Crisis and Rising Costs
- •The ongoing conflict involving Iran and the closure of the Strait of Hormuz has disrupted 20 percent of global oil supplies and sent Brent crude prices surging above 100 dollars per barrel.
- •The enactment of the US Graham Act targets major buyers of Russian crude like China and India, threatening to remove another 3.5 percent of global supplies.
- •Petroleum product shortages, especially diesel in Europe and the US, have forced the G7 to release 100 million barrels of reserves.
- •India faces a growing economic burden as its crude oil basket price rises significantly, substantially increasing its annual oil import bill.
- •Diplomatic efforts remain stalled as US-Iran negotiations break down, threatening further hostilities and sustained high energy prices unless a political solution is found.
Key Questions Answered
The West Asia war has driven up the price of the Indian crude oil basket from $70.86 per barrel prior to the conflict to $117.3 per barrel. Every $1 increase in crude oil prices adds nearly ₹18,000 crore to India's annual oil import bill, while LPG prices have surged above $800 per tonne from $460 before the war.
The Graham Act enacted by the US targets the top five buyers of Russian crude, including India and China. If invoked, it could remove 3.5% of global crude oil supplies by cutting off Russia's exports, though President Trump may delay invocation before November Congressional elections to avoid surging US gasoline prices.
Indirect negotiations at the UN General Assembly collapsed because Iran wanted to revert to the 17 June Memorandum of Understanding signed by both sides, which was rejected by the US following advice from the Saudi Crown Prince against returning to that agreement.
