India faces a heightened risk of disruption to cooking gas supplies compared with crude oil imports as tensions escalate around the Strait of Hormuz, a critical global energy chokepoint.
While oil flows have so far remained resilient, any sustained disruption to petroleum product shipments would push up India’s import bill, widen pressures on the capital account and add to downward strain on the rupee, trade experts and analysts said.
India imports about 80–85 per cent of its LPG (liquified petroleum gas) needs, with the majority sourced from Gulf suppliers — almost entirely transiting Hormuz. Unlike crude, India does not maintain strategic LPG (cooking gas) reserves of comparable scale, making LPG flows more logistically sensitive in a disruption scenario, Sumit Ritolia, lead analyst with Kpler, said in a note.
Moreover, it may not be easy to diversify to other sources to procure LPG as it would be for crude oil. Despite India having excess refining capacity, production of cooking gas, which is the fastest-growing petroleum commodity in the country, remains low.
“While it is possible to import from other geographies such as the US, freight costs would be higher. The impact on the LPG subsidy bill would depend on the extent of any surge in LPG prices as well as freight costs. Currently, under-recoveries per cylinder are quite low, but if LPG prices rise, these would increase accordingly,” said Prashant Vasisht, senior vice-president and co-group head, corporate ratings, Icra Ltd.
For crude oil, it may be possible for India to quickly shift to Russian crude, which is floating around in the Arabian Sea. Kpler tracking indicates continued availability of Russian cargoes in the Indian Ocean and Arabian Sea region, including volumes in floating storage.
“Should West Asian inflows tighten, Indian refiners could pivot back toward Russian grades relatively quickly,” Ritolia wrote in a LinkedIn post.
For now, India is working on the assumption that the closure of Hormuz will be short, lasting less than a week.
“Indian refineries put together hold anywhere between 10 to 15 days of crude inventories, both in tanks and in transit. Besides, all their fuel tanks are full, which can easily meet 7-10 days of the country’s fuel requirement,” an official told PTI. “For now, we think the closure of the Strait of Hormuz will not be very long,” the official added.
Unlike crude, the supply of LNG, which powers transportation in Delhi and Mumbai and feeds many fertiliser plants, may turn precarious if the closure lasts long. While near-term supplies are secured, a prolonged closure of Hormuz may leave India with insufficient alternatives, as most LNG volumes are locked in long-term contracts and only limited volumes are available in the spot or current market.
Effect on macros
Every $1 a barrel increase in crude oil prices inflates India’s oil import bill by $1.3-1.4 billion. Consequently, the longer the conflict lasts, the bigger the impact on the current account deficit and the rupee against the dollar.
“A surge in global oil prices could widen the current account deficit and fuel inflation.” Ajay Srivastava, founder of think tank GTRI, said in a note.
With US President Donald Trump claiming late on Sunday that the new Iranian leadership post the death of Iran’s Supreme Leader Ayatollah Khomeini is willing for a discussion with the US, there is a hope that the conflict may not stretch long.
“The situation in West Asia is unfolding and the extent that it prolongs and widens, would have a bearing on India’s macros, including things like the impact of fuel prices on inflation and the twin deficits, as well remittances,” Aditi Nayar, chief economist at ICRA, said before Trump’s comments.