An uncertain world needs food, fuel, forex buffers

The ongoing West Asia conflict has been considered the largest oil shock in history, taking off a fifth of the world’s supply that used to transit the Strait of Hormuz daily. Yet, all through this, global crude prices haven’t surged like they did in the previous shocks of 2022 or 2008. One reason has been the International Energy Agency-coordinated action, on March 11, for the release of some 426 million barrels by member countries from their emergency oil stockpiles over a four-month period. This quantity made available to the market has put a lid on crude prices, which settled within $90-110 per barrel in April-May and eased to $70-80 by mid-June, when the war was seemingly over. It’s another thing that the hostilities have resumed, even as the oil buffers are running thin due to the earlier inventory drawdowns. The same buffer story may play out in food, where the Food Corporation of India’s rice and wheat stocks of 121.7 million tonnes (mt) as on June 1 are nearly thrice the required minimum level. Government agencies are also holding over 4 mt of pulses stocks. And it’s not only India. The world, too, is awash with ample supplies from the record 2025-26 harvests of wheat, rice, corn, sugar and even soyabean, palm oil and rapeseed. Drawing down of these stocks should act as a cushion against any El Niño-induced production disruptions in the current agricultural year. The contrast with 2022 is, again, instructive. At the start of the Russia-Ukraine war, the world was still recovering from the supply chain dislocations caused by the Covid lockdowns. The buffers then weren’t adequate for the global oil and food commodity markets to absorb that war shock. For India, the situation was compounded by the strong El Niño event of 2023-24 that unleashed a prolonged episode of food inflation. The short point is that accumulating large reserves — whether of forex, food or fuel — has become central to the policymaker’s arsenal in today’s world of rising climate and geopolitical risks. There is a cost to such stockpiling, similar to spending on defence and maintaining a standing army. Their utility is proved only during supply shocks from weather, war or a balance of payments crisis. How much of this cost the government should bear, and the feasibility of stocking various commodities, is both a fiscal and strategic calculation. All the more reason for the government to have an integrated policy on strategic reserves — of all three ‘Fs’.