TheInterviewTimes.com | February 21, 2026 | 08:44 PM IST | New Delhi
India Oil Crisis 2026: Brent crude nears six-month highs at $71.61 per barrel, hitting India’s economy as Russian oil imports drop to 1.1 million bpd. Trump tariff cuts demand shift to pricier sources, boosting inflation risks and trade deficit to $34.68 billion. Latest updates on rupee, refining margins.
India grapples with mounting economic strain as Brent crude oil prices climb to $71.61 per barrel on February 20, 2026, marking a nine-month high driven by US-Iran tensions. The nation, which imports 88 percent of its oil needs, faces higher procurement costs after slashing Russian crude purchases to 1.1 million barrels per day in January, the lowest since late 2022. This shift stems from a February trade pact with US President Donald Trump, who reduced tariffs on Indian goods from 50 percent to 18 percent in return for curbing Moscow-sourced oil.
Shift from Russian Crude
Russia’s share in India’s oil imports fell to 21.2 percent in January as refiners like Reliance Industries halted deliveries and state firms cut volumes. Saudi Arabia now leads as top supplier, with February imports projected at 1 to 1.1 million barrels per day, the highest in six years. Only Indian Oil Corporation, Nayara Energy, and Bharat Petroleum bought Russian crude last month, per data trackers.
The US pressure intensified after Trump imposed punitive tariffs last year, warning of hikes unless India reduced Russian buys. Prime Minister Narendra Modi agreed to prioritize US energy and goods worth over $500 billion annually under the deal announced February 2.
Surging Import Bills
Procurement costs have risen $5 per barrel above Dubai benchmarks this fiscal year due to narrower Russian discounts and pricier alternatives. ICRA estimates every $10 per barrel Brent increase adds $13 to $14 billion to India’s net oil import bill and widens the current account deficit by 0.3 percent of GDP. January’s merchandise trade deficit ballooned to $34.68 billion, fueled by gold imports and the tariff relief timing.
State refiners benefited from cheap Russian oil since 2022, saving an estimated $16.7 billion. Now, switching to Middle Eastern grades pressures gross refining margins, especially with government-fixed domestic fuel prices.
Rupee and Trade Pressures
The Indian rupee strengthened to 90.73 against the USD on February 20 after hitting a record low of 92.29 in January. Yet sustained oil rallies could reverse this, amplifying import expenses in local currency terms. Exports dipped to $36.56 billion in January amid the transition.
Inflation and Growth Risks
Reserve Bank of India forecasts CPI inflation at 2.0 percent for FY26, with Q1 FY27 at 3.9 percent, citing easing food pressures but noting energy volatility as an upside risk. Crisil revised its FY26 projection to 3.2 percent earlier, factoring lower crude but now faces headwinds from the surge.
Higher oil threatens GDP growth after RBI’s 125 basis point rate cuts in 2025. Geopolitical premiums, pegged at $7 to $10 per barrel by analysts, could persist if Strait of Hormuz risks escalate.
Outlook for Refiners and Policy
State firms like Bharat Petroleum reported strong Q3 FY26 profits from prior margins, but compression looms. Indian Oil’s GRM quadrupled recently, yet the Russian pivot challenges sustainability. Experts urge balancing geopolitics with energy security to shield consumers from pump price hikes.
