Relevance: GS III (Economy & Energy Security) | Source: The Indian Express / IEA Reports

1. The Big News: What is Happening?

India’s reliance on buying crude oil from foreign countries has touched an all-time high of 88.6% in the current financial year.

• In Simple Words: Out of every 100 drops of oil India consumes to run its cars, factories, and airplanes, nearly 89 drops are bought from other countries. We produce only about 11 drops at home.

2. Why is our Dependency Increasing?

Instead of going down, our need for foreign oil has been steadily climbing for the last few years. Why?

• High Demand: India is growing fast. More people are buying cars, airlines are expanding, and heavy industries are running at full speed.
• Falling Supply at Home: While our daily oil needs are shooting up, our own domestic oil wells (like Bombay High) are getting older and producing less crude oil every year.

3. Why is this a Huge Problem? 

• The Money Drain: Buying billions of dollars worth of oil empties our foreign savings. This creates a huge “Trade Deficit” and weakens the Indian Rupee.
• Price Shocks (Inflation): Because we depend so much on outsiders, any war or tension in the Middle East immediately makes crude oil expensive. This increases petrol and diesel prices in India, making transport and daily groceries costlier for the common man.
• Missed Goals: The government had set a target to reduce this import dependency to 67% by 2022. Sadly, due to massive demand, we missed this target.

4. How Can We Fix This?

To fight this dangerous “oil addiction,” India is pushing for alternatives:

• Ethanol Blending: Mixing sugarcane-based ethanol into normal petrol so we need to buy less pure crude oil.
• Going Electric: Heavy promotion of Electric Vehicles (EVs) and clean Green Hydrogen fuel.
• Emergency Storage: Building massive underground rock caves, known as Strategic Petroleum Reserves (SPR), to safely store extra oil. If a war stops our imports, these reserves will keep the country running.

A Positive Fact for UPSC: Even though India imports raw, dirty crude oil, we have massive, world-class oil refineries. We actually clean this crude and are a major exporter of finished products (like refined petrol and aviation fuel) to other countries!

UPSC Value Box

UPSC Prelims Practice Question

Q. With reference to India’s petroleum sector and energy security, consider the following statements:

1. India’s domestic crude oil production has been steadily increasing over the last five years to meet the rising energy demand.
2. Despite its high dependency on imported crude oil, India is a net exporter of refined petroleum products.
3. The International Energy Agency (IEA) forecasts that India will be the largest driver of global oil demand growth in the coming decade.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Correct Answer: (b)