The current geopolitical turmoil has led to high prices of crude oil, transport and marine insurance, which, coupled with a weak rupee against the US dollar, is pushing up India’s oil and gas import as well as its current account deficit (CAD). However, the same factors are also helping the world’s third largest crude oil importer to reduce its US dollar outflows, albeit in a moderate range. India imports more than 88 per cent of its crude oil requirement.
For instance, while India’s oil and gas import bill during FY25 and FY26 averaged at $166.65 billion, export earnings stood at $42.75 billion, which helped compensate for roughly 26 per cent of the import bill.
During June-August 2026, India’s oil and gas imports averaged at $15.93 billion, while exports averaged at $4.77 billion, helping compensate for around 30 per cent of the total import bill.
High freight rates
Analysts and refiners pointed out that record high shipping freight rates and high marine insurance premiums are adding more volatility to high crude oil prices. India’s CAD has risen to $11.2 billion during April-July this fiscal year against $6.6 billion during the same period in FY26.
Oil Minister H S Puri in October 2025 said that oil marketing companies (OMCs) pay around $5 per barrel to transport crude from the US and about $1.2 from West Asia. In the last 5 years, PSUs such as IOCL, BPCL, and HPCL have spent nearly $8 billion on chartering ships.
Ashish Rajodiya, Head of Commodities at PL Capital, said the rupee has opened Monday with a rebound of around 1 per cent to near 95.80 against the dollar, from Friday’s close of 96.71. “From today (Monday) it will sell dollars to Indian Oil, HPCL and BPCL to cover their entire daily requirement until further notice, taking a major source of dollar demand out of the spot market. The catch is the cost: dollar sales to oil companies will draw down reserves, which already slipped by nearly $13 billion in the week to October 2,” he added.
On Monday evening, Brent was at $106.8 per barrel and Murban was at $110.6 a barrel. The crude oil price for Indian basket on Friday (October 9) was $124.22 per barrel. The monthly Indian basket price for October 2026 averaged at $121.85 a barrel, the highest in the current fiscal year.
As per ICRA, a $10 per barrel uptick in the average crude oil price for the fiscal pushes up the net oil imports by around $12-13 billion during the year, thereby enlarging the CAD by 0.3 per cent of GDP.
The price pinch also reflects in CPI inflation, which CareEdge Ratings said rose to a 23-month high of 5.5 per cent in September, breaching the RBI’s 4 per cent target for the fourth consecutive month. Global energy prices remained volatile amid the ongoing conflict in West Asia. Higher energy costs contributed to transport inflation, while elevated cooking fuel and food prices kept inflation high in restaurant and accommodation services.
Published on October 12, 2026
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