Key facts
- India's crude oil import bill has surged due to increased oil prices and higher shipping and insurance costs.
- Freight rates for Very Large Crude Carriers (VLCCs) from Ras Tanura, Saudi Arabia to India have increased by 411% to $4.34 per barrel since February 28.
- War-risk insurance for a single voyage through the Strait of Hormuz has risen from $250,000 to up to $10 million.
- Brent Crude prices have increased by approximately 25% since the conflict began.
- India's crude oil import costs rose 60% in the April-June quarter year-on-year.
India's crude oil import bill has significantly increased due to the ongoing conflict involving Iran, which has disrupted Middle Eastern oil supply and driven up shipping and insurance costs. Freight rates for Very Large Crude Carriers (VLCCs) on the key route from Ras Tanura, Saudi Arabia, to India have surged by 411% to $4.34 per barrel in August, compared to $0.85 before the conflict began in late February. This escalation in shipping costs, coupled with a 25% rise in Brent Crude prices and a quadrupling of war-risk insurance premiums for voyages through the Strait of Hormuz, has substantially inflated India's import expenses.
The cost to transport crude oil on non-Middle Eastern routes has also seen a sharp rise. Freight rates from Corpus Christi to India have jumped 150% to $15.86 per barrel, while shipping costs from Russia's Ust-Luga port on the Baltic Sea have more than doubled to $19.90 per barrel. War-risk insurance for a single passage through the Strait of Hormuz has climbed from $250,000 to as much as $10 million.
These increased transportation and insurance expenses add to the already elevated price of crude. India paid 60% more for its crude oil imports in the April-June quarter compared to the same period last year, despite slightly lower import volumes. This trend continued into the third quarter, with the July import bill showing a 41% increase year-on-year.