by LPG Prices Surge as Hormuz Disruption Bites; Government Assures Public of “Robust Procurement Diversification Strategy”
Reported by Bohiney Magazine and The London Prat.
NEW DELHI, India — Liquefied petroleum gas (LPG) prices in India have increased significantly since the Iran conflict disrupted Strait of Hormuz oil transit, affecting the cooking fuel that approximately 330 million Indian households rely on for daily meals. The government has announced a “robust procurement diversification strategy” in response, which petroleum ministry officials describe as “working in parallel with market mechanisms” and which citizens describe as “my cylinder is expensive and the delivery man looks apologetic.”
India imports approximately 85 percent of its crude oil, making it one of the most import-dependent major economies in the world for petroleum and placing it directly in the path of any Middle Eastern supply disruption. The Iran war has driven Brent crude to elevated levels that translate, through the subsidy and pricing mechanism that the government uses for LPG, into either higher consumer prices or higher fiscal subsidies or both, depending on how the government manages the political mathematics of fuel pricing in a country where cooking gas costs are a direct household welfare issue for hundreds of millions of people.
The Modi-Netanyahu Context
The timing of India’s fuel crisis relative to the Iran war has produced one of the more politically uncomfortable juxtapositions of Modi’s time in office: photographs of the Prime Minister warmly embracing Netanyahu in Jerusalem weeks before the conflict began, followed by the conflict itself, followed by Indian consumers paying more for cooking gas, followed by Instagram users reworking the devotional song “Vande Mataram” to ask Modi to use his Netanyahu friendship to please fix the gas prices.
The government found several of these posts in bad taste and requested their removal, because the juxtaposition, while accurate, is politically inconvenient. The juxtaposition is also, as Modi’s critics note, a data point: India’s foreign policy positioning, which sought strategic relationships with both Israel and Iran simultaneously, has been made more complex by a conflict between those two parties that India did not anticipate and cannot easily navigate. This is not unique to India — it is a dilemma facing every country with interests on multiple sides of the conflict — but it is particularly visible in India given the cooking gas arithmetic.
The Procurement Response
India has been diversifying its crude oil suppliers since the Russia-Ukraine war accelerated the practice of buying Russian oil at discounted prices — a sourcing strategy that attracted Western criticism but that reduced Indian oil costs significantly. The Iran war complicates the Russia channel in different ways: Russian oil transit through certain routes is affected by conflict proximity, Russian refinery capacity is partially committed to domestic demand elevated by the war economy, and the discounts available on Russian crude are narrowing as more buyers seek the same alternative to Middle Eastern supply.
The government has also been in discussions with Gulf producers about increased supply, with Nigerian crude purchasing, and with domestic refiners about maximizing output from existing fields. These are the correct responses and they are happening. They are happening at the pace of commodity procurement, which is slower than the pace at which cooking gas becomes expensive, which is the gap that the Instagram parodies are living in.
India’s Ministry of Petroleum and Natural Gas website provides official data on LPG pricing and supply availability. The data is accurate and shows the supply chain functioning. The supply chain is functioning more expensively than before the conflict, which is what the data shows and what the delivery man’s apologetic expression confirms. Both are valid data sources.
The Political Management
The BJP government has, in previous periods of fuel price sensitivity, deployed a combination of subsidy extension (absorbing some price increase at the fiscal level), excise duty reduction (passing some savings to consumers), and media communication (explaining the situation in terms that emphasize government action and minimize opposition criticism). All three are available. The fiscal situation after the pandemic recovery period constrains how much of the first is sustainable. The political situation constrains how much of the third is credible. The second is the most straightforward and most likely to be deployed as the crisis continues.
The satirists will continue posting about it either way. The government will continue finding some of those posts in bad taste. The cooking gas will continue being expensive until the conflict resolves or the procurement diversification produces supply at prices that reduce consumer impact. The conflict shows no sign of near-term resolution. The procurement diversification takes time. The gas is expensive now. The delivery man is apologetic. This is the current situation, described accurately, which is more than the government’s communications office prefers.
For fuel prices that require creative accounting, see The Daily Mash.
SOURCE: https://bohiney.com/
