By Lalita Ahlawat
On 11 March 2026, the 32 member countries of the International Energy Agency (IEA), the Paris-based intergovernmental body founded after the 1973 Arab oil embargo to coordinate energy security among advanced economies, unanimously agreed to release 400 million barrels of crude oil from their emergency reserves. It was the largest coordinated stock release in the agency’s 50-year history, triggered by what IEA Executive Director Fatih Birol called “unprecedented” oil market disruptions following Iran’s effective closure of the Strait of Hormuz. The Strait, a narrow waterway between Iran and Oman through which roughly 20 million barrels per day, or about a quarter of global seaborne oil trade, normally transits, had become a war zone.
The decision laid bare a fact energy policy circles had long discussed but markets had not priced: in a genuine supply crisis, the asset that matters is the number of barrels a country has already paid for, already stored, and already controls on its own soil. By that measure, the world has divided into three tiers. The Iran conflict has exposed which tier India belongs to, and the discrepancy with the leading tier is now a strategic problem in New Delhi.
What strategic petroleum reserves are, and how they work
A Strategic Petroleum Reserve (SPR) is a stockpile of crude oil, owned or controlled by a national government, held outside the day-to-day commercial supply chain, and intended for release only during severe supply disruptions. The defining features distinguish SPRs from ordinary inventories. Ownership sits with the state rather than with refiners or traders. The barrels are physically stored in dedicated infrastructure, most commonly underground rock caverns or salt domes, which are geological formations excavated below the surface, cheaper to build and safer against fire and sabotage than above-ground tanks. And release is controlled by political authority rather than market signals.
The international architecture for SPRs was created after the 1973 oil embargo, when Arab producers cut supplies to countries that supported Israel in the Yom Kippur War, quadrupling crude prices and tipping the developed world into recession. In response, the IEA was established in 1974 with a binding rule: every member country must hold oil stocks equal to at least 90 days of the previous year’s net oil imports. The “90-day” benchmark has since become the global standard for energy security. Member countries can meet it through three mechanisms, government-owned stocks, which are held by state agencies, industry stocks, private refiners and traders required by law to hold minimum inventories, or agency stocks, a separate state-owned stockholding entity that buys and stores oil on behalf of the government. Most countries combine all three.
IEA stocks are not stored idle. They are actively managed, rotated to prevent degradation, occasionally sold and replenished to take advantage of price cycles, and in extreme cases released in coordination through the IEA’s emergency response mechanism. Since 1991, there have been six such coordinated releases, the latest and largest being March 2026.
The global league table
The Iran crisis crystallised who had prepared and who had not. According to the US Energy Information Administration, EIA, the statistical arm of the US Department of Energy, four economies dominate the league.
China sits at the top, and by an extraordinary margin. China is not an IEA member and does not publish inventory data, so estimates rely on satellite imagery, customs records, and refinery throughput modelling. The EIA estimates that China added an average of 1.1 million barrels per day to its strategic oil inventories through 2025, reaching nearly 1.4 billion barrels by December. That is more than triple the US SPR, and larger than the combined holdings of all 32 IEA member states. Preliminary government data suggest Beijing continued building inventories into 2026 even before the conflict began. China’s stockpile blurs the line between traditional SPR sites and commercial storage held by state-owned oil majors such as Sinopec and CNPC (China National Petroleum Corporation); a 2025 domestic energy law formally integrated both under one national reserve system. According to a February 2026 paper from the Oxford Institute for Energy Studies, China’s surge was driven by relatively low crude prices through 2025, mounting sanctions risk on Russia, Venezuela, and Iran, and the new law requiring corporate “social responsibility” reserves.
The United States operates the world’s most famous strategic stockpile, the SPR established in 1975 under President Gerald Ford after the embargo. Stored in salt caverns along the Gulf of Mexico in Texas and Louisiana, the SPR has a maximum capacity of 714 million barrels. Heavy drawdowns under the Biden administration after Russia’s invasion of Ukraine in 2022 left the reserve at 413 million barrels by December 2025, and post-March releases brought it to roughly 405 million by mid-April 2026. The US is now a net oil exporter and is technically not bound by the 90-day IEA rule, but the SPR remains its principal lever for influencing global prices and supporting allies.
Japan holds the third-largest stockpile, with roughly 470 million barrels at end-2025, of which 263 million are government-held under JOGMEC, the state-owned stockholding agency. Japanese law adds a second layer, under the Oil Stockpiling Act, private industry are required to hold an additional 70 days of demand, around 220 million barrels. Combined, Japan holds roughly 254 days of domestic consumption, the deepest buffer of any major economy. South Korea, similarly exposed as a near-total oil importer, holds about 79 million barrels in government inventory, roughly 208 days of net import cover.
OECD Europe collectively held about 179 million barrels in government inventories in December 2025. Germany operates Europe’s largest single reserve, with about 110 million barrels of crude and 67 million barrels of refined products primarily in the Etzel salt caverns near Wilhelmshaven. France, Italy, Spain, and other EU members combine government and industry-mandated stocks to meet a 90-day European Union directive.
Every major oil-importing economy that has learnt the lesson of 1973, plus China which has learnt the lesson of geopolitical sanctions risk, has built a deep, multimonth buffer. Energy security is a function of forethought and capital, not luck at the moment of crisis.
The Indian position
India is the world’s third-largest crude oil consumer and one of the most import-dependent. The Council on Foreign Relations, citing the IEA’s World Energy Outlook 2025, notes India imported nearly 87% of its crude in 2024, a dependency projected to rise to 92% by 2035 as domestic production declines and demand grows from 5.5 million barrels per day to a projected 8 million by 2035. Roughly half of India’s crude, around 2.6 million barrels per day in early 2026, transits the Strait of Hormuz.
Against that exposure, the dedicated Indian SPR system holds 5.33 million metric tonnes, equivalent to 36.92 million barrels, across three underground rock cavern facilities at Visakhapatnam in Andhra Pradesh (2015), Mangaluru in Karnataka (2016), and Padur near Udupi in Karnataka (2018). The facilities are managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a special purpose vehicle, which is a state-owned company set up to execute a specific government project, created in 2004 under the Oil Industry Development Board within the Ministry of Petroleum and Natural Gas. According to ISPRL, India held 21.4 million barrels in the SPR as of March 2025; the rest of the capacity is either leased to the Abu Dhabi National Oil Company (ADNOC), the state oil company of the United Arab Emirates, or not yet filled. At full capacity, India’s SPR covers approximately 9.5 days of national consumption. At current fill levels it covers roughly 5 days. Indian officials prefer a broader headline. At the Confederation of Indian Industry summit on 13 May 2026, Petroleum Minister Hardeep Singh Puri said India holds “60 days of crude and 60 days of LPG” reserves. That figure combines the government-held SPR with commercial inventories held by state-owned refiners such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation Limited (HPCL), each required to hold around 64.5 days of crude. The combined buffer reaches 74 days at full operating level.
The reserve architecture matters greatly. A 74-day combined buffer that depends on commercial inventory is structurally weaker than the same 74 days held by a dedicated agency in dedicated infrastructure. Commercial stocks must keep refineries running; they cannot all be drawn down without halting fuel production. Government SPR stocks are released specifically to substitute for missing supply and protect against price shocks. India’s truly sovereign, release-on-demand buffer is closer to 5 to 9.5 days, an order of magnitude below Japan’s 146 government days, China’s effective 200-plus days, or the US SPR’s roughly 130 days.
What India is doing, and why it is not yet enough
Phase II of the Indian SPR programme, announced in the 2017-18 Union Budget and reaffirmed since, aims to add 6.5 million metric tonnes of capacity in two new locations. A 4 MMT facility at Chandikhol in Odisha, a coastal site with deep-water access and proximity to the eastern refining cluster, and a 2.5 MMT expansion of Padur are planned. The 202526 Union Budget allocated Rs 5,597 crore (about $670 million) to Phase II, and ISPRL has invited bids for Padur-II as India’s first commercial-cum-strategic underground crude storage built under a Public-Private Partnership (PPP) model, in which private parties design, build, finance, and operate the facility while the government retains first call on the oil in emergencies.
Two operating model changes have also been pushed through. ISPRL has been permitted to lease up to 30% of its cavern capacity to Indian or foreign companies, generating commercial revenue while preserving sovereign rights of first refusal; the ADNOC arrangement at Mangaluru and Padur is the principal example, with about 3 million barrels of Emirati crude stored there. ISPRL can also buy and sell up to 20% of capacity to optimise inventory cycles.
These are useful but inadequate steps. Even after Phase II, currently scheduled for the late 2020s, India’s total SPR capacity reaches roughly 11.83 MMT, or about 22 days of consumption at projected 2030 demand. The IEA’s 90-day benchmark would require capacity closer to 50 MMT, more than four times the Phase II target. The December 2023 report of the Parliamentary Standing Committee on Petroleum acknowledged the gap, recommending smaller strategic storage of 2 to 3 days’ worth at five to six existing refineries, which could add 15 to 20 days of capacity faster than greenfield cavern construction. That recommendation has not been formally adopted.
The Iran conflict has imposed a financial cost that reframes the calculus. India’s stateowned oil marketing companies were reportedly losing around Rs 1,000 crore (roughly $120 million) per day in early May 2026 as global crude prices crossed $100 a barrel while retail fuel prices in India, politically sensitive ahead of state elections, were held below cost. The annualised loss at that rate would more than fund the entire remaining Phase II SPR programme in one year. Reserves are not free, but their absence is more expensive.
The case for a different orientation
Three principles should guide an Indian SPR strategy adequate to its strategic exposure.
The first is indubitably scale. The IEA benchmark of 90 days is not a ceiling; it is a floor designed in the 1970s for economies less import-dependent than India is today. A country importing 87% of its crude, projected to rise to 92%, with half its imports transiting one of the most contested chokepoints in the world, should aim higher. A 90-day government-held SPR plus the existing 60 to 65 days of mandated commercial inventory would place India at roughly Japan’s level. That requires not 11 MMT of SPR but 40 to 50 MMT, an eightfold expansion of Phase II ambitions.
The second would be geography. India’s existing and planned SPR sites are concentrated on the southeastern and south-western coasts, well-suited to Persian Gulf imports but vulnerable to Indian Ocean disruption. New caverns should be developed inland and on the west coast facing alternative supply routes from East Africa and Russia, so reserves remain accessible even under naval interdiction scenarios in the Arabian Sea.
The third is portfolio. India should follow Japan and Germany in mandating that private refiners hold a higher, fixed days-of-demand buffer, Japan requires 70 days from industry; India’s is informally around 64.5. Beyond storage, India should expand bilateral agreements, it has tested the model with ADNOC and explored leasing 5 million barrels in Oman, and should pursue similar arrangements with Saudi Aramco, Russian state oil companies, and African producers, with first-call rights formalised under bilateral government accords. The IEA permits member countries to count foreign-stored oil toward the 90-day requirement if a bilateral government guarantee exists; India should adopt the same framework.
A fiscal innovation is also available. The 2025-26 Budget allocation of Rs 5,597 crore for SPR Phase II is approximately 0.001% of the Rs 53.47 lakh crore total Union expenditure for 2026-27. Quadrupling the SPR programme would add roughly Rs 25,000 crore in capital expenditure spread over the late 2020s, less than half of one quarter’s losses at oil marketing companies during the current crisis. A dedicated Sovereign Energy Security Bond, a long-dated rupee bond earmarked for SPR construction and procurement of cavern crude at trough prices, would let India build the reserve on its own balance sheet while crude is cheap, without straining the general fiscal deficit.
What this implies for India
The Iran conflict has not been a one-off shock. It is the visible part of a longer arc in which global oil trade is being reorganised around chokepoint risk, secondary sanctions, and the willingness of consuming nations to build sovereign buffers. China spent 2025 quietly preparing for exactly this scenario; Japan has been prepared for 50 years; the United States is still working through the consequences of drawing down its reserve in 2022-23.
India sits in a different position. It is the IEA’s most consequential association country, the world’s fastestgrowing major oil consumer, and the importer most exposed to the Strait of Hormuz. Its current strategic buffer is among the thinnest of any large economy. The capital cost of fixing this gap is modest relative to the running cost of being unprepared, and the five-to-seven-year construction lead time for new cavern capacity means the work must begin now to be ready for the next crisis rather than the current one.
The deeper recognition the Iran conflict should drive in Delhi is that energy security is no longer adjacent to economic policy. For a country whose oil import bill in 2024-25 ran over $130 billion and whose consumer price inflation moves with global crude within weeks, the SPR is not a niche petroleum-ministry project. It is a macroeconomic stabiliser. China understood this before the war. The question for India is whether it acts before the next one.