How India managed oil embargo and energy crises of 1973 and 1979
As the US-Israel war against Iran continues to shape global energy security, what lessons do past oil shocks offer for navigating the current situation? Don't miss infographics.
India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. (Credit: Pexels) — Stuti Gogoi
The largest-ever disruption of energy supplies caused by the US-Israel war against Iran has left major global economies struggling with energy shortages. Amid the possibility of a new round of negotiations between Iran and the US, concerns over supply disruptions appear to cool down with oil prices dropping in early trade on Thursday.
However, the Iran war has damaged as much as $58 billion worth of energy infrastructure, according to an estimate by Rystad Energy. This does not bode well for economies like India, as its dependence on imported crude oil grew to over 88.5 per cent in the first 10 months of the current financial year FY26.
India's Oil Vulnerability — Five Key Numbers
As the crisis in West Asia continues to shape global energy security, what lessons do past oil shocks offer for navigating the current situation? Let’s examine. But first, a brief overview of India’s energy mix and import dependence.
India’s energy basket
The unfolding crisis in West Asia has a profound impact on India’s energy market, as the country is heavily dependent on West Asia for its energy imports.
Crucially, a huge chunk of those imports passes through the Strait of Hormuz – a waterway between the Persian Gulf and the Gulf of Oman. Around 2.5–2.7 million bpd of India’s crude imports – accounting for almost half of the country’s total oil imports – have transited the strait in recent months; the longer-term average is around 40 per cent.
With a population of 1.46 billion and a fast growing economy, India has seen a steady growth in its energy demand. This demand is met through various energy sources, with coal remaining the largest source of energy supply.
According to the International Energy Agency (IEA), around 48.4 per cent of India’s total energy demand is met through coal and coal products as of 2023. Crude oil constitutes the second largest source, accounting for 24.7 per cent of total energy supply.
As coal is the mainstay of India’s energy basket, its domestic production has registered a considerable growth, with 1047.5 million tonnes produced in 2024-2025 compared to 997.8 million tonnes in 2023-2024.
On the other hand, domestic oil production meets only about 13 per cent of total demand. In 2023, domestic oil production averaged around 700 thousand barrels per day. As a result, India remains heavily dependent on crude oil imports.
India’s strategic petroleum reserves (SPRs), which have a capacity to store 5.33 million tonnes of crude oil, are currently holding 3.37 million tonnes of oil, or just about two-thirds of their total storage capacity, according to the Ministry of Petroleum and Natural Gas (MoPNG).
Energy import profile
India is the second largest importer of crude oil, with total crude oil imports standing at 244.5 million metric tonnes in 2024-2025. This means that nearly 90 per cent of India’s energy demand is met through imports.
West Asia has traditionally been India’s primary source of crude oil imports, with over 70 per cent of its crude oil coming from Saudi Arabia, Iran, Iraq, Kuwait and the United Arab Emirates.
Although India has sought to diversify its sources of oil supply since 2005 and included supplies from African countries like Nigeria and Angola as well as Venezuela, West Asia still constitutes about 60 per cent of the country’s energy import basket.
Currently, Russia, Iraq, Saudi Arabia, the UAE and the US are the top five crude oil suppliers. The total share of imports from these countries increased from 75.23 per cent in 2022-23 to 82.7 per cent in 2024-25.
Oil shocks: What history tells us
But the ongoing crisis in West Asia once again highlights the vulnerability of energy supplies to geopolitical tensions. At the same time, global oil shocks are not a new phenomenon. Let’s see how India navigated some of the major shocks in the past.
The 1973 oil crisis
During the 1973 Arab-Israeli war, Arab members of the Organization of Petroleum Exporting Countries (OAPEC) imposed an embargo on the US and other countries that were supporting Israel. The embargo reduced about 7 percent of the global supply, while embargoed countries faced a combined shortage of 4.5 million barrels of oil per day.
This was one of the first crises, when global economies were jolted by the strategic power of oil. As part of a coordinated move by Arab countries to cut production, oil prices surged by 70 per cent to $5.11 per barrel. The impact was severe, pushing major economies like the US into recession that lasted until 1975. In the UK, this led to the fall of the Conservative government led by Ted Heath.
For India, the oil shock had a significant economic impact. Its import bill rose sharply from about $500 million in 1973 to $1.3 billion dollars in 1974. Rising petroleum prices and shortages of petroleum-based fertilisers even affected India’s agricultural output.
The Five-Year Plan, launched in 1974, had estimated oil import expenditure at $3.8 billion by 1978. However, the sharp increase in oil prices – reaching around $8 per barrel – proved the estimate inadequate. Inflation surged by 20 per cent, while the demand for petroleum stagnated and imports declined.
The 1979 oil crisis
The next major shock followed in 1979 after the Iranian Revolution. Political instability led to a decline in Iran’s oil production – around 7 per cent of world production at the time. This resulted in a rise of oil prices from $13 per barrel in mid-1979 to $34 per barrel in mid-1980. The crisis hit the global economy still recovering from the first oil shock just a few years earlier.
Amid these conditions, India was compelled to approach the International Monetary Fund (IMF) for assistance to address its balance of payment issue. This engagement is often seen as laying the foundation for the process of economic liberalisation, as the IMF support came in exchange for structural adjustments.
Post read questions
Geopolitical tensions in West Asia continue to shape global energy markets. Evaluate with reference to recent developments and their implications for India.
What are strategic petroleum reserves? Evaluate their role in mitigating oil shocks in India.
Global oil shocks expose the structural vulnerabilities of energy-importing economies like India. Discuss with examples.
Examine the impact of the 1973 oil crisis on India’s economy and policy direction.
Discuss the role of the Strait of Hormuz in India’s energy security. Why is it strategically significant?
(Stuti Gogoi is a Doctoral Candidate at the Centre for West Asian Studies, JNU. The second part of the article will examine other major oil shocks around the 1990 Gulf war, the Russia-Ukraine war, and the ongoing Iran war, and analyse India’s response.)
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