The consequences of a prolonged US-Israel-Iran war can be unpleasant for India — an energy importer with a major dependence on West Asian supplies for crude oil, liquefied petroleum gas (LPG) and liquefied natural gas (LNG). India may be hit by both price and quantity shocks, the former on account of rising market price as well as a depreciating currency. A month’s strategic reserves of crude and petroleum products gives India some time to work out alternative supplies to plug the disappearance of roughly half its crude oil imports of five million barrels per day.
The US has deigned to allow India to buy Russian crude till the middle of April — but that cannot amount to much, as there will be multiple bidders. India must contract Russian crude again without demur; this is a force majeure situation, arguably of the US’ making. There can, however, be no escaping the premium that will have to be paid for Russian oil. West Asian oil that passes through the Strait of Hormuz accounts for about 20 per cent of global supplies, and that has stopped. Russia’s share in India’s oil imports has fallen from an average of 31.5 per cent in value terms in 2025 to 19.8 per cent in January this year, with the shares of Saudi Arabia and US rising sharply. Now, India may have to revert to Russia; in the absence of Russia’s oil, it is not really possible for India to secure the 2.6 million barrels per day that are off the grid.
As for retail prices, oil companies can perhaps absorb the current price shock for a short while, as they have made surpluses over a period when price drops were not passed on to consumers. So far, global prices have risen by nearly $15 since the war began and are in the region of $90 a barrel. If this situation continues, the Centre and States will either have to cut excise duties, which will impact their revenues and the fisc, or pass on the price rise to protect oil marketing firms. India has been in this unenviable situation before, and the impact on fiscal deficit and prices has invariably been adverse. What is more concerning is the squeeze with respect to LPG and LNG. The West Asian region accounts for a large share of imports. India imports half its LNG requirement and about two thirds of its LPG requirement (essentially propane and butane). Sixty eight per cent of its $9.2 billion LNG imports in 2025 were from Qatar ($6.3 billion), Oman ($1 billion) and UAE ($1.8 billion). Likewise, over 90 per cent of its LPG imports of $13.9 billion in 2025 were from West Asia.
The Centre has rightly issued emergency orders to oil refiners, urging them to maximise the use of propane and butane for LPG. As for LNG, fertilizers will likely be accorded priority over other user industries, in view of the squeeze on supplies. The demand for electricity as a transportation and cooking fuel option is likely to rise. These are hard times — but the crisis may actually improve resource use and energy efficiency.
Published on March 6, 2026