Recent political and economic developments in Venezuela are unlikely to cause any immediate disruption to India's oil supplies or influence domestic fuel prices in the short term. However, analysts suggest that if the United States manages to consolidate its influence in the South American nation, it could eventually pave the way for India to access and diversify its sources of crude oil.
India's Shrinking Venezuelan Oil Imports
The longstanding sanctions imposed by the United States on Venezuela's oil sector have already significantly reduced the flow of its crude into global markets, including to India. Data reveals that Venezuela was India's 18th largest source of crude petroleum in the previous year. However, its ranking has slipped to 21st for the period from April to October this year, with the total import value during these months standing at just over $300 million.
Government officials in New Delhi are adopting a wait-and-watch approach regarding the evolving situation. "We don't know how things play out but there is no immediate impact on our supply," a senior official stated, reflecting the current stance of monitoring events without making long-term projections.
Expert Analysis: Minimal Economic Impact, Potential for Future Gain
Energy and trade experts concur with the government's assessment of minimal immediate fallout. Ajay Srivastava, founder of the think tank Global Trade Research Initiative (GTRI), provided historical context. He noted that while India was a major buyer of Venezuelan crude in the 2000s and 2010s and Indian companies like ONGC Videsh held significant stakes in Venezuela's Orinoco belt, bilateral engagement has sharply declined since 2019 due to US sanctions. "For India, the Venezuelan disturbance is unlikely to have any material economic or energy impact," Srivastava affirmed, explaining that India had already scaled back imports and commercial activities to avoid secondary sanctions.
Prashant Vashisht, Senior Vice President at ICRA Ratings, echoed this view, pointing out that the short-term impact on the global oil market is limited because Venezuelan crude has been largely absent from international trade for a considerable time. The country's exports have already fallen dramatically.
Sentimental Market Effects and a Strategy for Diversification
Despite the limited direct impact, some economists warn of potential indirect effects. Gaura Sengupta, Chief Economist at IDFC First Bank, suggested that the crisis could still exert a sentimental influence on financial markets. This sentiment might contribute to increased volatility in emerging market currencies, including the Indian rupee. She described it as "another significant event after the high US tariffs," even though India's current account deficit has remained low this fiscal year.
Sengupta also highlighted a strategic opportunity for India. "As of now, we don't see an impact on retail fuel inflation. Hence, if and when Venezuelan oil comes to the market, Indian oil companies should take advantage and diversify," she advised. This perspective points to a future where a stabilized Venezuela could re-emerge as a viable and diversified source for India's energy needs.
Venezuela possesses the world's largest proven oil reserves, accounting for roughly 17% of the global total. However, its current production tells a different story. It was the 20th largest crude producer last year. Years of underinvestment have caused output to plummet from a peak of approximately 2 million barrels per day to around 1 million barrels per day, representing just about 1% of worldwide production. Energy Institute data indicates a 10% decline in production between 2014 and 2024. Reviving output to significant levels would require massive new investments in the country's dilapidated oil infrastructure.
