Skyrocketing Freight Costs Force India to Rethink Oil Import Strategy

India's energy giants are sounding the alarm over soaring global shipping costs, which are effectively wiping out the benefits of discounted crude oil imports. Indian Oil Corporation (IOC) Chairman A S Sahney, speaking at a recent industry event in Goa, highlighted that 'freight is eating up' the savings from cheaper crude, urging a swift expansion of India's domestic shipping fleet and strategic oil and gas storage. This comes as freight rates for oil tankers have jumped nearly seven-fold in the past year, making the cost of bringing oil to India a 'killing factor' for refiners, even when buying at reduced prices. The core issue stems from a combination of geopolitical tensions, particularly in the Middle East and the Black Sea, coupled with a shortage of available tankers. These factors have driven up Very Large Crude Carrier (VLCC) rates to unprecedented levels, increasing India's overall crude oil import bill by a significant 48% between April and August 2026, despite similar import volumes. While India has strategically pivoted to sources offering discounted crude, like Russia, the advantage is now being eroded, forcing a diversification of sourcing to include more competitively priced Middle Eastern barrels to offset transport expenses. Looking ahead, India is already moving to address these vulnerabilities. The government launched a $10 billion plan in May 2025 to build 112 domestic tankers by 2040, aiming to drastically reduce reliance on foreign vessels. Alongside this, there's a strong push to significantly expand crude and Liquefied Petroleum Gas (LPG) storage capacity, with plans for a 30-day LPG stockpile underway. These ambitious moves are crucial for India to bolster its energy security, stabilize domestic fuel prices, and maintain its growing refining capacity amidst an increasingly unpredictable global energy landscape.