Why LPG, not petrol or diesel, took the hit amid Hormuz choke

A week after the US-Israel strikes on Iran started the war in the Middle East, long queues for LPG cylinders began appearing across India. The Centre maintained that there was no shortage but an LPG crunch is evident. Why are petrol and diesel supplies not affected, given they also come from the same region?

Amid the war in the Middle East, India's LPG supply chain is showing clear signs of stress. There are long queues outside gas agencies. Dozens of restaurants and dhabas have shut, and households are waiting days for refills. That's because the Strait of Hormuz, one of the world's most important energy shipping lanes, is choked. The US-Israeli strikes on Iran and Tehran's retaliation have disrupted maritime traffic in the Middle East, a region that is a major fossil fuel exporter. India also depends on energy imports from the region. So, why are LPG supplies showing stress first, while petrol and diesel are not? Why do petroleum fuels like petrol and diesel that are also sourced from the region, remain available in Indian retail markets?

The panic over LPG gas cylinders, reported since March 9, has now turned increased manifold. Such fears were reflected in queues at some CNG, diesel, and petrol stations from March 12. However, they were few and far between.

The government has maintained that there is an adequate supply of petroleum fuel, which is refined to produce petrol and diesel. In the case of LPG too, the government has reiterated that there would be no disruption in supplying the domestic sector. And the panic on the streets, depicted by long queues, fist fights and delays in cylinder delivery has been called by the Centre, a "demand-driven distortion". However, the sale of commercial LPG cylinders has been halted to prioritise domestic consumers. This, plus the soaring prices of LPG refills on the black market, led to the downing of the shutters of several eateries.

So when the choke point at Hormuz in the Persian Gulf tightened, LPG supplies felt the shock first. India's kitchens noticed the stress before its petrol pumps and private cars did. A screengrab of a live shipping map on Friday evening shows ships and container vessels lined up on both sides of the Strait of Hormuz in the Persian Gulf, with only a few vessels actually moving through the passage. (Image: marinetraffic)

India consumes over 31 million tonnes of LPG every year, according to data from the petroleum ministry. Domestic production meets less than half that demand. The rest comes from imports from Gulf countries such as Saudi Arabia, Qatar, the UAE and Kuwait. So, tankers carrying this fuel must pass through the Strait of Hormuz before reaching India. But a very large share of India's LPG shipments move through this route. Estimates in the media suggest that around 80-90% of LPG cargoes heading to India pass through the Strait of Hormuz.

The difference lies in crude oil supply and refining, which is little more diversified compared to LPG supplies.