What do Indian kitchens have to do with California gas prices? India’s LPG crisis may hold the answer
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A global fuel shock links India and California Photograph: (AFP)
Iran’s near-closure of the route has since thrown global fuel markets into turmoil, forcing countries to draw down reserves and rethink supply chains. The knock-on effects are now being felt from Indian kitchens to American petrol stations.
India is currently navigating a severe Liquefied Petroleum Gas (LPG) supply crunch. In California, motorists are paying more than $6 a gallon for petrol. Though separated by thousands of miles, both crises stem from the same disruption: the collapse of energy flows through the Strait of Hormuz following the US-Israeli conflict with Iran. Before the conflict, roughly one-fifth of global oil supplies passed through the narrow waterway. Iran’s near-closure of the route has since thrown global fuel markets into turmoil, forcing countries to draw down reserves and rethink supply chains. The knock-on effects are now being felt from Indian kitchens to American petrol stations.
Why India’s LPG shortage matters to California
India relies heavily on liquefied petroleum gas (LPG) as its primary cooking fuel, with more than 90 per cent of imports previously sourced from the Middle East. Faced with tightening supplies, New Delhi directed refiners to maximise LPG production to prevent a deeper domestic shortage.
That decision, however, has created another problem overseas. Indian refiners have reduced production of alkylates — cleaner-burning fuel additives produced using LPG feedstock. California depends heavily on alkylates because the state mandates a unique petrol blend designed to reduce smog and meet strict environmental standards. “With India’s LPG supply constrained by the closure of the Strait of Hormuz, refiners there are producing and exporting less alkylate, adding pressure to an already tight California gasoline market,” Mason Hamilton, chief economist at the American Petroleum Institute told Reuters.
Reliance Industries, operator of the world’s largest refinery complex in Jamnagar, Gujarat, said this month it was cutting alkylate output and exports to prioritise LPG production. According to Kpler data, India’s alkylate exports fell to 33,000 barrels per day in April, nearly half March levels and the lowest since October 2023.
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California faces limited options
The supply squeeze comes as California’s fuel market is already under pressure from falling Asian fuel exports and low stockpiles. According to Reuters, GasBuddy data showed average petrol prices in the state reached $6.14 per gallon on Friday, with analysts warning prices could climb beyond $6.50 in the coming weeks. “The more acute the alkylate supply shortfall becomes, the higher it could push prices in California,” said GasBuddy analyst Patrick De Haan.
Meanwhile, India’s shortages remain severe, with reports of long queues for LPG cylinders and some consumers turning to the black market. Restaurants and small businesses have also warned of possible shutdowns as the global energy disruption continues to spread across economies.
