No quick fix for India to ramp up US energy imports amid tariff threat

The attrition in US energy flows to India comes even as the US announced a 25% tariff on automobile, and proposed to impose a reciprocal tariff on Indian products from April 2

India’s purchases of US energy products have lost momentum in the last few years, driven by lack of competitive rates and geopolitical uncertainties, causing concern over how much more energy products India can import to plug a $36 billion trade surplus with the US and neutralize proposed tariffs by Washington.

 

But an urgency crept in this year after the share of US oil in India's overall crude import basket slumped by more than half in 2024 to 4 percent from 2021 levels, and Donald Trump stepped in to slap tariffs indiscriminately. Purchases of US crude oil doubled in March from February but was flat from January; however, imports in the first quarter of 2025 at 44 million barrels were already 60 percent of US suppplies for entire 2024, according to data accessed from market intelligence agency Kpler.

 

LNG imports were dismal in March, down by 35 percent on the month and the second lowest since the war in Ukraine began in 2022. Imports of ethane, a key feedstock for petrochemicals, have been declining over the last five years while imports of LPG, comprising ethane and propane, in 2025 are a sixth of 2023 levels on a monthly basis, according to US government data.

 

The attrition in US energy flows to India come even as Washington announced a 25 per cent tariffs on automobiles, and proposed to impose a reciprocal tariff on Indian products from April 2, dubbed “US Liberation Day”. India’s energy exports to the US are also exposed to the tariff threat. Fuel sales to the US averaged around $4.4 billion in calendar 2024, mainly by private sector refiner Reliance Industries. And, over $1 billion in annual sales of solar modules to the US are also on the tariff radar.

 

Part of India’s plans to engage Washington involves purchase of more US energy products. Annual energy imports from the US comprising coal, fuels, LNG, petroleum coke, and crude oil, among others, totalled around $15 billion, accounting for over a third of overall imports from the US, according to Indian customs data.

 

LNG imports from the US totalled $1.4 billion in financial year 2023-24 (FY24) and $2.2 billion in April-December period of FY25, according to Customs data. Crude oil purchases were valued at $5.4 billion in calendar 2024, and petroleum product imports totalled $3.85 billion. Imports of petcoke, used as fuel in industries, totalled $1 billion in FY24, and $680 million in April-December of FY25; and imports of coal amounted to $4.3 billion and $2.6 billion, respectively, during the two periods, Customs data showed.

 

Doubling energy imports

 

Imports of US energy would need to double if India has to shave 40 percent of the trade surplus, amid a backdrop of lower oil prices and weaker global economic growth, industry officials said.

 

Any urgency is undesirable, analysts said. “The rise in US crude imports must be deliberate as India could use that as a bargaining tool in tariff negotiations with Washington,” said Vandana Hari, a Singapore-based energy expert and founder of Vanda Insights.

 

Top refining officials, including the head of a state-run refiner, told Business Standard that New Delhi does not dictate purchases of US oil nor does it impose quotas, disputing some media reports. Moreover, the government cannot impose sourcing mandates on private sector refiners Reliance Industries and Russian Rosneft-run Nayara Energy. In case of state oil companies, refining executives must justify why a certain crude was purchased in future audits, officials said, illustrating that it wouldn’t be easy for New Delhi to push the pedal on US oil imports.

 

Term contracts with the US are not possible because America lacks a state oil company to coordinate sales, unlike in the case of Russia or West Asia. In addition, refiners face limitations increasing oil purchases from the US because of plant configurations and premium pricing of most US oil grades, officials said.

 

Crude oil imports from the US increased to around 300,000 bpd in March from 145,000 bpd in February. A majority of imports comprised premium light, sweet WTI Midland grades, typically used by Bharat Petroleum and Hindustan Petroleum in Mumbai refineries, which were designed for similar quality crudes from Mumbai High fields of ONGC. The remaining oil was dirty, discounted heavy, acidic Cold Lake Blend grade, mainly used by Reliance in its Jamnagar refinery. 

 

LNG purchases

 

India has a huge appetite for US LNG, priced off domestic gas benchmark Henry Hub, but these contracts take years to conclude.

 

Imports of US LNG have slowed this year. Indian state-run companies Gail and Indian Oil have term contracts with US liquefaction projects for a combined 6.5 million tons a year of LNG, equating to over 550,000 tons a month. But purchases have averaged only 180,000 tons a month in 2025--Gail importing less than 100,000 tons into India--compared to US LNG purchases averaging 400,000 tons a month in 2024, Kpler data shows.

 

Gail is selling US LNG to traders and swapping the same for supplies from elsewhere into India after attacks by Houthi rebels on oil and gas tankers crossing the Suez Canal bloated transport costs and increased travel times to India, company officials said. Swaps do not count under Indo-US trade.

 

Indian imports of US ethane have also declined, according to the US Energy Information Administration. Imports in 2024 declined to 65,000 bpd for a 14 per cent share of total US exports from as much as 83,000 bpd, or a third of US sales, in 2019. LPG imports from the US in 2024 at 0.11 million tons were a fourth of 2023 levels and a fraction of the 0.86 million tons imported in 2020, Kpler data showed. Gulf suppliers led by the UAE, Qatar, Kuwait and Saudi Arabia are the biggest suppliers.