The aftermath of the Saudi oil attacks

Oil prices soared to as much as $67.50 per barrel on Tuesday following the drone attacks on Saudi Aramco’s oilfields, which is the world’s largest oil processing facility. This has disrupted around 5% of the global oil supply and accounted for Brent crude’s highest jump since the Gulf War of 1991.

Yemen’s Houthi rebels claimed responsibility for the attacks on Aramco’s plants.  Yemen’s Vice President Ali Mohsen Al-Ahmar condemned the attacks and tweeted “We condemn this blatant assault on economic security and stand with our brothers in the kingdom to deter Iran’s malicious arms.”

US Secretary of State Mike Pompeo accused Iran of being behind the drone attacks and President Donald Trump warned of a possible military response.

Iran called the US allegations meaningless and  refused to hold talks with them. Iran’s Supreme Leader Ayatollah Ali Khamenei said that if Washington returns to the 2015 nuclear deal, “then it can join multilateral talks between Iran and other parties to the deal.”

The Indian Dilemma

Despite Saudi Arabia’s reassurances, the hike is worrying for India as Saudi Arabia accounted for 18% of the 226 million tonnes of crude the country imported last year. Prices of petrol and diesel are likely to go up by Rs 5 per litre over the next few days.  Manufacturing industries, transportation costs and airlines will be affected by this hike.

While the US has the world’s largest strategic reserve of crude oil to meet two months of its requirement, India’s strategic oil reserves maintained by Indian Strategic Petroleum Reserves Limited (ISPRL) will not last beyond two weeks.

Any further escalation of tension in the Gulf might affect India’s energy security. In such a situation, India will have to look for alternative sources since supply lines from the Gulf region will be restricted.