Why has India promised to buy more U.S. oil? | Explained

India aims to boost energy ties with the U.S., increasing oil and gas purchases to enhance supply diversity.

The story so far: India committed to procure more oil and natural gas from the U.S. when Prime Minister Narendra Modi met U.S. President Donald Trump in February in Washington amid tariff threats. Foreign Secretary Vikram Misri said India’s energy purchases from the U.S. could increase from last year’s $15 billion to $25 billion in the near future. A Reuters report showed that the U.S. exported about 3,57,000 barrels per day (bpd) of crude to India in February, compared with exports of about 2,21,000 bpd last year.

India is the world’s third-largest oil importer and consumer. For a country which relies on imports for more than 85% of its crude oil requirements, any step to secure hydrocarbon supplies is crucial. The country has promised to enhance oil and gas purchase from the U.S., which will bolster energy ties, and also help, to an extent, in achieving the ambitious doubling of bilateral trade to $500 billion over the next five years. At present, the bilateral trade is in India’s favour. The statistics of the Office of the United States Trade Representative show that the goods trade deficit with India was $45.7 billion in 2024, which is a 5.4% increase from 2023. Executive Director (Energy Transition and Cleantech Consulting) at S&P Global Commodity Insights Gauri Jauhar said that procuring more oil and gas from the U.S. will add to the diversity of major, long-term sources of supply.

The aim is to establish the U.S. as a leading supplier of crude oil and petroleum products and liquefied natural gas (LNG) to India. It has been decided to ramp up trade in the hydrocarbon sector, including ethane and petroleum products, with an eye on supply diversification and energy security. The two sides agreed to enhance investments, particularly in oil and gas infrastructure, and facilitate greater cooperation between energy companies. Strengthening cooperation in civil nuclear energy and U.S. support for India to be made a full member of the International Energy Agency (IEA) were also mentioned.

India imported a total of 234.26 million tonnes of crude oil in 2023-24. Import dependence touched 87.8% against 87.4% in the previous financial year. Domestic production corresponds to less than 13% of the requirement, with domestic crude oil production remaining almost unchanged at 29.36 million tonnes last fiscal (2023-24). In volume terms, the imports were almost similar, but the import bill in 2023-24 declined year-on-year to $133.37 billion on the back of lower international rates. In 2022-23, the oil import bill was $157.53 billion. Additionally, India spent $22.93 billion on the import of 48.69 million tonnes of petroleum products like LPG, fuel oil and petcoke. It also exported 62.59 million tonnes of products for $47.72 billion.

India also imports LNG. In 2023-24, the country imported 31.80 billion cubic metres (bcm) for $13.405 billion. In the previous fiscal, gas imports were 26.30 bcm for $17.11 billion, the Petroleum and Natural Gas Ministry said in a report, citing the price shock of 2022-23 in the wake of Russia’s invasion of Ukraine.

India is keen on increasing the share of clean fuel in its energy basket. Emphasising on the strategic importance of energy ties with the U.S., especially for LNG, petroleum and natural gas, Minister Hardeep Singh Puri said India wants to increase its natural gas consumption to 15% from the existing about 6%.

In recent years, the U.S. has emerged as one of the largest suppliers of LNG to India. If war-related sanctions against Russian are lifted, Europe may resume sourcing natural gas from Russia again, making the U.S. intensify efforts to enhance supplies to other existing customers and explore new markets.