Indian families could soon face a serious shortage of cooking gas because the war in the Middle East has trapped supplies of liquefied petroleum gas (LPG) in the Persian Gulf. This problem adds to India’s growing energy crisis and could push inflation higher in the country.
LPG supplies at immediate risk
As reported by Bloomberg, while global attention focuses on crude oil and liquefied natural gas shipments stuck near the Strait of Hormuz, India’s most urgent problem is LPG. Even though LPG is a smaller part of the overall energy market, a shortage would directly affect tens of millions of households that depend on it for cooking.
According to people familiar with the situation, deliveries expected in March must begin moving within days to avoid a supply crunch. They spoke on condition of anonymity because they are not authorised to speak publicly.
Limited alternative sources
India has tried to reduce its dependence on the Gulf region by signing a long-term supply deal with the United States. However, supplies from the US are much smaller. Availability is limited and shipping costs are higher. Traders say that even if India makes emergency purchases from the US now, the shipments would not arrive before April.
“India has limited flexibility when it comes to sourcing LPG from alternate suppliers,” said Sumit Ritolia, an analyst at Kpler told Bloomberg. “While some incremental volumes could potentially be secured from the US, Russia or Argentina, these would remain marginal and highly dependent on freight economics and global spot availability.”
Current stock levels
A government official said on Tuesday that India’s LPG stocks can stretch nearly 30 days. However, if new shipments do not arrive soon, supplies could tighten quickly.
Indian refiners have already met government officials to prepare emergency energy plans after the recent attacks in the Middle East. The region supplies nearly two-thirds of India’s liquefied natural gas and close to half of its crude oil.
In the liquefied natural gas market, where storage is limited and shipping rates have risen sharply, industries are already feeling the impact. Petronet LNG, India’s largest LNG importer, has declared force majeure on supplies from Qatar. As a result, deliveries to customers have been cut by nearly 50%.
India currently holds nearly eight weeks of commercial and strategic reserves of crude oil and petroleum products. This means the country may not face immediate problems in oil supply.
However, if the Persian Gulf remains blocked for several weeks, India may have to ration supplies and reduce refinery operations. One backup option could be using Russian oil cargoes that are already waiting in Indian waters, even though India has reduced purchases from Moscow. US officials have also mentioned this option.
If crude oil supplies drop significantly, Indian refiners may also need to stop exporting fuel.
India’s oil ministry said on Tuesday that it was “reasonably comfortable in terms of stocks” and confident that steps could be taken to manage the crisis.