The escalating geopolitical tensions between the United States and Venezuela are drawing international attention, but for India, the situation appears unlikely to significantly disrupt oil security or trade. A recent research note from Bank of Baroda suggests that despite Venezuela possessing vast oil reserves, its current production levels and India’s limited trade exposure mitigate potential risks. This analysis provides reassurance amidst global uncertainties surrounding energy supplies.
Venezuela-US Tensions: Minimal Impact on India’s Oil Supply
Venezuela holds the world’s largest proven oil reserves, accounting for a substantial 19.4% globally. However, translating these reserves into actual supply has proven challenging. The Bank of Baroda report highlights that Venezuela’s current contribution to global oil production is relatively small. In 2024, Venezuela’s share of global oil production was only 1%, amounting to 960 Million Barrels per day (MBPD).
This limited output means that even with potential US intervention or policy changes, the immediate risk of a major disruption to global oil supply remains low. The expectation of increased supply, should Venezuela fully utilize its reserves, has already had a moderating effect on crude oil prices, with a softening observed in recent trading sessions. This is a positive sign for importing nations like India.
Supply-Side Constraints and Global Glut
While the potential for increased Venezuelan oil production exists, significant hurdles remain. Years of underinvestment, political instability, and sanctions have hampered the country’s ability to ramp up output. Consequently, the report emphasizes that supply-side constraints limit any near-term implications for global markets.
Furthermore, the report suggests that global crude supplies are likely to remain in a “glut mode,” meaning there’s an oversupply of oil relative to demand. This further diminishes the potential for Venezuela-related tensions to significantly impact prices or availability. This situation is beneficial for India, which relies heavily on crude oil imports to fuel its economic growth.
India-Venezuela Trade: A Modest Relationship
Beyond the global supply picture, the Bank of Baroda analysis focuses on India’s direct economic ties with Venezuela. The findings indicate that bilateral trade between the two countries is relatively modest, currently standing at USD 1.9 billion. Of this, India’s exports to Venezuela are USD 217 million, while imports are USD 1.6 billion.
This limited exposure means that any disruption to trade relations would have a contained impact on the Indian economy. Additionally, India’s export exposure to Venezuela has been declining, with a Compound Annual Growth Rate (CAGR) of -8.8% over the past five years, even as India’s overall exports to the world have grown.
Import Dependence and Competitive Pricing
India’s imports from Venezuela are heavily concentrated in petroleum crude and products (POL), with crude petroleum being the dominant component. However, the report clarifies that India doesn’t exhibit a structural dependence on Venezuelan oil. While imports from Venezuela have increased in FY25, this doesn’t signal a critical reliance.
Importantly, Venezuela offers India a competitive price for its oil. The unit value of petroleum products from Venezuela is significantly lower compared to other major oil-importing countries for India. This price advantage has been a key factor in maintaining the trade relationship, despite the geopolitical complexities. The focus on energy prices is crucial for India’s economic planning.
No Immediate Risk to India’s Oil Import Bill
In conclusion, the Bank of Baroda report delivers a reassuring message for India. The current geopolitical tension between the US and Venezuela does not pose an immediate risk to India’s oil security or trade position. The combination of Venezuela’s limited current production, the anticipated global oil glut, and India’s modest trade exposure all contribute to this positive outlook.
The report explicitly states that it does not foresee any upside risk to India’s oil import bill. This allows policymakers and businesses to focus on other economic priorities without undue concern over potential energy supply disruptions. For further insights into India’s energy sector and trade relations, explore recent reports on India’s diversifying oil sources and strategies for energy independence. This analysis underscores India’s resilience in navigating complex global geopolitical landscapes.
