India’s LPG bill came under heavy strain after the disruption around the Strait of Hormuz – a key waterway for energy shipments – sent global prices for the cooking fuel sharply higher. India paid about 29% more per tonne for imports of liquefied petroleum gas (LPG) than anticipated before the Middle East conflict after the disruption, according to a new analysis from the Centre for Research on Energy and Clean Air (CREA). The higher cost for LPG, a common cooking fuel, added about $1.1 billion to India’s import bill in the six months since the attacks.
The Development Shedding light on India’s reliance on imported LPG and vulnerability to global energy geopolitics.
India’s LPG import bill soared because: Middle East disruption of key supply routes
Why did the price hike occur for India’s LPG?
The Strait of Hormuz is a crucial shipping lane through which significant quantities of energy exports from Gulf countries flow to Asian consumers. US-led attacks on Iran triggered disturbances, impacting both the supply and price of LPG, one of the most widely used cooking gases in India. Unlike crude oil prices for most of Asian markets, LPG prices are predominantly tied to Saudi Aramco’s monthly contract prices.
The sudden spike in its contract prices therefore had a direct impact on the cost of LPG purchased by Indian refiners.
Saudi Aramco’s contract price increased from about $545 per tonne in February to $750 per tonne in April, up about 38%, before reaching roughly $760 in June, according to CREA data. The price subsequently dropped to $580 in July. Moreover, India buys more than half of its LPG as butane, whose official selling price rose nearly 48% in April to $800 per tonne.
India Cut Back on Imports of LPG Amid the Price
Spike Higher prices did lead to a decrease in India’s imports of the fuel. In fact, imports for the six-month period fell about 26% short of market forecasts, with a significant 49% year-on-year drop in March. Nevertheless, imports rose in the subsequent months, to approximately 86% of the average monthly rate between 2024 and 2025, by the end of June.
The Middle East impact changed the composition of India’s LPG supplies, too.
India’s imports from the US rose from about 8% to about 32% between February and April. ‘The supply was re-routed, and the US was a quick alternative supplier,’ said the report. Indian kitchens paid much more ‘at import parity’ Import costs increased for both spot and contract volumes. At import parity prices, a standard 14.2kg cylinder was set to cost about $8.10 during March-August, compared with about $6.28 before the crisis, according to CREA calculations.
The import costs therefore stood about 29% higher per cylinder.
However, it’s crucial to note that the import parity price does not reflect the retail price of a cylinder as it excludes subsidies, taxes and other costs passed to the consumer. Price surge for imported gas increased India’s LPG bill by $1.1 billion Indian buyers added about $4.7 billion to their LPG bills during the six months after the April conflict over Hormuz strait,CREA said, with about $1.1 billion attributed to the global price shock. The data covered in more detail the March-June periods showing that India spent an additional $788 million on the cooking gas, suggesting that with a broader outlook of six months it was about $1.1billion as estimated.
The data highlighted a significant concern in India, where gas stoves remain out of reach for many households. It also raises concerns over energy security since a significant proportion of India’s needs are imports. India’s fuel demand and supply concerns can rise due to the war with Iran.
India’s LPG Import Bill Rose Despite a Drop In Consumption
What does the Hormuz crisis mean for India’s energy security?
Given the substantial increase in oil and other fuel prices, it’s clear that global disruption has significant economic ramifications beyond gas prices, and the increased spending of about $22 billion over the previous six months on importing fossil fuel could make India more reliant on internal sources of energy. India has since then committed to increase domestic cooking gas production, which comes as a result of continuing concerns over geopolitics. The country’s plans to scale up its PNG connectivity also come into action while increasing domestic gas usage is also being explored. In light of such concerns, diversifying LPG sources from regions other than that of the Middle East could be an important strategy for India, as a reliance on such a narrow section of supply routes would continue to place the country vulnerable to future threats.
India Looking to Expand Its PNG and LPG Networks India, in effort to secure the fuel sources is actively working to set gas production targets for oil companies operating in the country.
The Ministry of Petroleum and Natural Gas will be issuing directions to refiners on this issue to improve domestic gas production. However, it’s important to be mindful that despite the supply disruption India also went down in the prices, but it’s unsure if the price would go lower due to global supply and geopolitical factors at play.
