The Rupee and India’s Oil Dependency – India’s Oil Bill: How Rupee Depreciation Amplifies Energy Costs Trending
The Rupee and India’s Oil Dependency – India’s Oil Bill: How Rupee Depreciation Amplifies Energy Costs Trending
Oil is the backbone of the global energy system, driving economies and powering everyday life. But in India, the cost of oil is not just about global prices it is also about the rupee. As the currency weakens, the country ends up paying more for the same barrel, turning exchange rate movements into a hidden driver of energy costs.
| Year | Crude oil, Brent ($/bbl.) | USD/INR Exchange Rate | Actual Cost (₹ per barrel) | Counterfactual Cost (₹) | Currency Impact |
| 2015 | 52.37 | 64.15 | 3360 | 3360 | 0 |
| 2016 | 44.05 | 67.21 | 2961 | 2826 | 135 |
| 2017 | 54.39 | 65.11 | 3542 | 3489 | 52 |
| 2018 | 71.07 | 68.39 | 4861 | 4559 | 301 |
| 2019 | 64.03 | 70.42 | 4509 | 4108 | 401 |
| 2020 | 42.30 | 74.07 | 3133 | 2714 | 420 |
| 2021 | 70.44 | 73.93 | 5208 | 4519 | 689 |
| 2022 | 99.82 | 78.70 | 7856 | 6404 | 1452 |
| 2023 | 82.62 | 82.59 | 6823 | 5300 | 1523 |
| 2024 | 80.70 | 83.68 | 6753 | 5177 | 1576 |
| 2025 | 69.04 | 87.17 | 6018 | 4429 | 1589 |
India imports almost 80% of its oil requirements from countries like Russia, Iraq, Saudi Arabia, UAE, U.S.
When we look at the Global brent crude oil prices we for the last decade (i.e. from 2015-2025) we see that there was a shar fall in prices during 2020 due to the pandemic and again a sharp increase in 2022 due to the geopolitical uncertainties and the Russia Ukraine war.
Brent crude prices rose from $52.37 per barrel in 2015 to $82.62 in 2023, an increase of roughly 1.5 times. However, while oil is purchased in dollars, the cost is ultimately borne in rupees. This means the exchange rate plays a critical role in determining how expensive oil becomes domestically. When converted into rupees, the cost per barrel rose from ₹3360 in 2015 to ₹6823 in 2023, nearly doubling over the same period.
The key driver behind this difference is currency depreciation. To isolate its impact, we compare two measures: the actual cost, which reflects both global oil prices and the prevailing exchange rate, and a counterfactual cost, which assumes the rupee remained at its 2015 level. The difference between the two represents the currency impact per barrel that is, the extra rupees India pays purely due to the weakening of its currency. In 2023, this amounted to approximately ₹1523 per barrel, meaning that even if oil prices had remained unchanged, India would still have faced significantly higher costs because of currency movements.
The period after 2020 marks a clear turning point. India experienced a double shock: global oil prices surged due to post-pandemic recovery and geopolitical tensions, while the rupee simultaneously weakened. This combination pushed oil costs to historic highs, with prices reaching ₹7856 per barrel in 2022 and the currency impact exceeding ₹1500 per barrel.
In 2024 and 2025, Brent crude prices show signs of softening, yet India’s cost per barrel remains elevated. The reason is simple: the rupee continues to depreciate. As a result, the benefits of lower global prices are only partially realized domestically. This creates a counterintuitive outcome falling oil prices do not necessarily translate into lower costs for India, as currency depreciation offsets much of the gain
The implications of this dynamic extend beyond energy markets. Higher oil costs feed directly into inflation through increased transportation and production costs, pushing up food prices and core inflation. At the macroeconomic level, a weaker rupee raises the import bill, widening the trade deficit and increasing pressure on the current account. For households, the impact is immediate and tangible, reflected in higher fuel prices and a rising cost of living.
Now Let’s Look at the Imports
| Year | Actual Cost ((₹ per barrel) | Counterfactual Cost (₹) | Imports (TMT) | Cost per tonne | Total Cost | Total Cost (₹ trillion (₹ Tn)) |
| FY2016 | 2961 | 2826 | 202850 | 21701 | 4402057353 | 4.40 |
| FY 2017 | 3542 | 3489 | 213932 | 25960 | 5553768048 | 5.55 |
| FY 2018 | 4861 | 4559 | 220433 | 35630 | 7853980314 | 7.85 |
| FY 2019 | 4509 | 4108 | 226498 | 33053 | 7486390492 | 7.49 |
| FY 2020 | 3133 | 2714 | 226955 | 22967 | 5212377585 | 5.21 |
| FY 2021 | 5208 | 4519 | 196461 | 38175 | 7499824496 | 7.50 |
| FY 2022 | 7856 | 6404 | 212382 | 57586 | 12230240577 | 12.23 |
| FY 2023 | 6823 | 5300 | 232700 | 50016 | 11638675303 | 11.64 |
| FY 2024 | 6753 | 5177 | 234262 | 49498 | 11595406826 | 11.60 |
| FY 2025 | 6018 | 4429 | 243225 | 44112 | 10729146309 | 10.73 |
Oil imports have steadily increased over time, with a temporary dip only during the pandemic. As a result, India’s total oil import bill has risen from around ₹4–5 trillion in the mid-2010s to over ₹11–12 trillion in recent years. This rise is not driven by global oil prices alone, but also by a weakening rupee and growing import volumes. The role of currency depreciation becomes even clearer at the macro level. From less than ₹0.2 trillion in 2016, the currency-driven portion of the oil bill has increased to around ₹2–3 trillion annually in recent years. This means that nearly one-fourth of India’s total oil import cost is now linked to exchange rate movements.
These findings have important policy implications. India’s energy strategy has traditionally focused on securing supply through diversification, building strategic reserves, and accelerating the transition to renewable energy. However, this analysis highlights an often-overlooked dimension: currency stability. For an import-dependent economy like India, managing exchange rate risk is just as important as managing energy supply.
Ultimately, India’s oil bill is no longer determined solely by global markets. It is increasingly shaped by the trajectory of the rupee. India does not just import oil it imports oil priced in dollars. As the rupee weakens, the country pays more for the same barrel, effectively turning currency depreciation into a hidden tax on energy. This hidden tax is not temporary; it is rising, structural, and deeply embedded in India’s economic reality.
So what is the way forward, and how can India reduce this currency burden and overall oil bill? One key solution is to reduce dependence on oil imports by investing more in renewable energy and accelerating the energy transition. The government is already promoting ethanol blending in petrol, which supports sustainability goals while also lowering reliance on crude oil imports. To make this effective, India needs to address gaps in energy infrastructure. At the same time, building stronger forex reserves can help stabilize the rupee and reduce the currency impact on oil costs.
Methodology Note
- Total Cost = Imports*Cost per tonne.
- Brent crude prices (nominal, annual averages) taken from World Bank
- Currency impact calculated as difference between actual and counterfactual costs
- Fiscal year import data aligned to calendar year using ending-year convention
- RBI Reference Rate (Exchange Rate) – https://www.nseindia.com/report-detail/rbi-reference-rate-statistics
- Oil Imports Data taken from PPAC – https://ppac.gov.in/import-export/history
- Brent Crude Oil data taken From World Bank Commodities data – Pink Sheet
- 2015 Assumed to be the base year
- Contrafactual Cost = Base Exchange Rate of 2015 (64.15) *Crude Oil Brent ($/bbl)
- Currency Impact = Actual Cost – Contrafactual Cost
- Cost Per Barrel is the actual Price India pays per barrel
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