Oil, LPG, and LNG – the backbone of a growing Indian economy – have seen their supplies being hit due to the Middle East tensions and the closure of the Strait of Hormuz – a key maritime route. While the Donald Trump administration has claimed that the war with Iran may soon come to an end, energy and oil supplies have become an important flashpoint in the tensions. Brent crude prices rose to $120 on Monday, before falling to below $90 mark on Tuesday.From India’s standpoint, energy supplies have been affected by the conflict in West Asia. India imports nearly 90 per cent of its crude oil, while more than 60 per cent of LPG demand and over half of its liquefied natural gas requirements are met through imports, most of which originate from the Gulf region.
India, which is the world’s third-largest importer and consumer of oil, maintains underground strategic petroleum reserves with a capacity of 5.33 million tonnes. However, these reserves are currently filled to about 80 per cent.More than oil though, it is the disruptions in LPG imports from West Asia that are having an immediate impact. While domestic LPG supplies remain adequate, there are currently “restrictions” on the distribution of commercial cylinders.What is India’s energy situation amidst the UR-Israel-Iran war? We take a look:
- India steps up Russian crude oil buys
India has stepped up Russian crude oil procurement to make up for the consignments stuck in the Middle East. While the US has claimed granting a 30-day waiver to India for purchasing Russian crude, officials have said that India has never required approval from any country to procure Russian oil. Russia remained the country’s largest supplier of crude in February. India has broadened its crude supply base as part of its energy diplomacy, increasing the number of supplier countries from 27 to 40 across six continents. As a result, the country’s energy security is no longer dependent on a single maritime chokepoint such as the Strait of Hormuz. India currently holds more than 250 million barrels, or nearly 4,000 crore litres, of crude oil and refined petroleum products. These reserves provide a buffer equivalent to about seven to eight weeks of supply across the energy system.2. Petrol, Diesel prices not expected to riseEven though Brent crude prices climbed to their highest level since mid-2022 on Monday, government officials have indicated that there are no immediate plans to raise retail fuel prices in India. “We are nicely placed vis-a-vis crude. There is unlikely to be a rise in petrol and diesel prices in the foreseeable future, even if prices remain at $110-120 a barrel,” said a senior government official.3. India refuses IEA call on strategic reservesIndia will not take part in the International Energy Agency’s initiative to release strategic oil reserves aimed at easing global crude prices, according to senior government sources.“The crisis (that led to a rise in prices) is not our creation. Those responsible have to deal with it and create situations to ease (prices),” a government source told PTI, making it clear that India will not draw from its reserves. Officials noted that India’s strategic reserves are meant to be used only in the event of disruptions in supply.“Ours is an India first policy,” the source added.4. Emergency measuresIndia has activated emergency steps to redirect natural gas supplies from lower-priority users to critical sectors following disruptions in liquefied natural gas shipments through the Strait of Hormuz, according to a government notification.In response to disruptions in imported gas supplies stemming from the escalating conflict in West Asia, the government has revised the priority framework for allocating domestically produced natural gas. The updated policy places LPG production at the highest priority level, alongside compressed natural gas (CNG) and piped cooking gas.According to a gazette notification, the gas requirements of these sectors will be met in full before supplies are allocated to other users.The fertiliser sector has been assigned the second level of priority, with at least 70 per cent of its average demand over the past six months to be fulfilled.Gas supplies to tea plantations, manufacturing units and other industrial consumers have been placed in the third category. These sectors will receive up to 80 per cent of their average gas consumption over the previous six months, depending on operational availability, the notification said.5. LPG production to be stepped upThe government has directed oil refiners to step up the production of cooking gas for domestic consumers. The country currently has more than 33.1 crore LPG users.In a directive issued on Monday, the government instructed oil refiners, including petrochemical complexes, to maximise the production of C3 and C4 streams such as propane, butane, propylene and butenes that are produced, recovered, fractionated or otherwise available with them. These streams are to be channelled into the LPG pool for supply to state-run companies Indian Oil, Hindustan Petroleum and Bharat Petroleum. The LPG produced under this arrangement will be distributed exclusively to domestic consumers.6. LPG refill minimum waiting goes upOil marketing companies have extended the minimum waiting period for booking a domestic LPG refill from 21 days to 25 days. The move aimed at preventing hoarding and avoiding an artificial shortage of cooking gas cylinders.The change follows an earlier revision made just last week, when the minimum booking interval was increased to 21 days from the previous 15 days.While emphasising that oil companies maintain sufficient stocks, government officials have noted that the longer booking interval is intended to discourage panic-driven bookings by consumers.Officials said that a typical household consumes around six to seven domestic LPG cylinders of 14.2 kg in a year and usually requires a refill only after about 50 to 55 days. 7. India eyes alternate supply sources for LPGIndia is seeking alternative LPG supplies from countries such as the United States, Algeria, Norway and Canada. Officials have said that India has secured LPG supply agreements with several countries, but deliveries are taking longer due to extended transit distances and disruptions to shipping routes. Shipments are currently underway and are expected to improve supply availability for consumers in the coming days. They said the government is closely monitoring the evolving global energy situation and is taking steps to ensure stability in supply chains.8. Government prioritises LPG for essential sectorsThe petroleum ministry has also said that imported LPG supplies meant for non-domestic use are being prioritised for essential sectors such as hospitals and educational institutions. For other non-domestic users, including restaurants, hotels and various industries, a committee has been set up to review requests and determine allocation, the ministry said.9. Commercial LPG shortages hit eateries and industriesDisruptions in global oil and gas supplies have created difficulties for non-domestic LPG consumers such as restaurants and industrial units. With the government prioritising supply for household users, the distribution of commercial LPG cylinders has slowed, leaving hotels, restaurants and roadside eateries facing an uncertain situation.In Bengaluru, small and medium-sized eateries could be forced to shut operations by Tuesday as they are likely to run out of cooking gas, according to the Bangalore Hotels’ Association. The group said that only about 10 per cent of hotels and restaurants in the city received LPG deliveries on Monday. P C Rao, honorary president of the association, warned that the situation could disrupt food services across the city.A similar situation is unfolding in Mumbai, where the supply of commercial LPG cylinders has been halted since Sunday.10. Inflation hit for India?Finance Minister Nirmala Sitharaman informed the Lok Sabha that the recent increase in crude oil prices is not expected to cause a sharp spike in inflation. Referring to the Monetary Policy Committee’s report released in October, she noted that a 10 per cent rise in crude oil prices typically leads to an increase of about 30 basis points in inflation, with 100 basis points equal to one percentage point.
