Facing the oil headwinds head on

India should carefully watch how the recently launched Shanghai International Energy Exchange cuts into the Western-dominated market for oil derivatives, and hedge its purchases accordingly

Crude oil prices rose to a four-year high of $86 a barrel in early October. When prices dipped after November 2014, India reformed energy subsidies and increased taxes on oil products to raise revenues. With prices spiking again, concerns are mounting on many fronts: Rising current account deficit (CAD), depreciating rupee, inflationary pressure, and fiscal uncertainty. We must understand what is at play — and leverage the shock for long-term energy security.

We have endured such crises before. The 1979 Iranian revolution and the second oil shock led to the rupee’s devaluation. The first Gulf War increased oil import costs