India is one of the world’s largest consumers of energy.

But there is an important fact behind that consumption.

India imports a large amount of the crude oil it needs.

Why?

The answer begins with a simple mismatch.

India needs enormous quantities of oil, but domestic production is not enough to meet that demand.

Crude oil is essential for much more than petrol and diesel.

It is used to produce fuels, chemicals, plastics and many other products that are part of modern life.

Transportation is one of the biggest reasons for India’s oil demand.

Cars, trucks, buses, aircraft and industrial machinery all require energy.

As India’s economy grows, demand for transportation and industrial activity also grows.

That creates a huge requirement for energy.

India does produce some crude oil domestically, but imports make up a significant part of its consumption.

This dependence creates an important economic challenge.

International oil prices can directly affect India’s import bill.

Imagine crude oil becoming significantly more expensive internationally.

India still needs to purchase the oil it requires.

That means the country has to spend more foreign currency on imports.

Higher oil prices can also increase costs for transportation and businesses.

Those higher costs can eventually affect the prices consumers pay for various goods and services.

There is another reason oil is closely connected to the rupee.

International crude oil transactions are generally conducted in US dollars.

So when India imports more expensive oil, the demand for dollars can increase.

This means oil prices, the rupee and inflation can all become connected.

This is why global conflicts can sometimes have economic consequences in India even when the conflict is happening thousands of kilometres away.

India has been investing in renewable energy, electric mobility, domestic energy production and other alternatives to reduce its vulnerability over time.

But replacing a huge existing oil-based system cannot happen overnight.

That is why crude oil remains one of the most important factors in India’s economy.

The next time petrol prices change or the rupee comes under pressure, remember that there may be a much bigger global energy story behind it.