Indian ships carrying LPG cross Hormuz | Forty tankers are heading for India but the most eagerly awaited cargo is cooking gas
Of the 40 ships waiting to sail through the Strait of Hormuz to India, the most urgently awaited are not the giant crude oil tankers but the vessels carrying liquefied petroleum gas, or LPG, the fuel used by hundreds of millions of Indian households for cooking.
After months of disruption, the fragile US-Iran peace deal – if it holds – is expected to allow shipping traffic to begin moving normally again through the strait that links the Persian Gulf to the Arabian Sea.
“LPG has been the most severely affected, with (Indian) imports falling to around 51 per cent of pre-war levels,” says senior Kpler energy analyst Sumit Ritolia. “That has created the strongest replenishment requirement.”
The strait has been severely disrupted since late February when the Middle East conflict erupted, trapping cargoes, delaying deliveries and sending energy markets into turmoil. While India managed to keep much of its crude oil flowing during the crisis, LPG imports were hammered.
Roughly a fifth of the world’s oil trade usually passes through the Strait of Hormuz.
Ritolia says the recovery “is expected to occur in phases rather than through an immediate normalisation of trade flows.” That’s because different fuels were affected in different ways.
LPG imports suffered the sharpest fall because the trade depends on special tankers, tightly scheduled deliveries and a limited number of suppliers. When ships were delayed or unable to load, there were few alternative sources available.
Liquefied natural gas is expected to recover next as Gulf export terminals return to normal operations and more vessels become available.
Crude oil, on the other hand, has proved surprisingly resilient throughout the crisis. Benchmark Brent crude was trading at just under $77 a barrel early on Wednesday, its lowest level since early March.
India continued receiving large volumes of oil because many cargoes had already left producing countries before the disruption intensified, suppliers prioritised crude exports, and refiners were able to draw on a broader range of sources than is possible for LPG. As a result, oil imports slowed but never collapsed.
Ritolia describes crude as “a later-stage normalisation story given the resilience of import flows throughout the disruption.” That resilience means there’s less urgency around replenishing crude supplies than there is around restoring LPG inventories.
Instead, analysts expect cooking gas and LNG cargoes to dominate the first wave of recovery.
“LPG and LNG are likely to be the first hydrocarbon flows to recover as Gulf shipping normalises, vessel availability improves and cargo availability from key Middle Eastern suppliers increases,” Ritolia says.
The reopening is also expected to provide a significant boost to India’s refining sector.
“Improved crude accessibility, lower freight and insurance costs, and greater supply flexibility should support higher refinery runs,” Ritolia notes, pointing to the commissioning and ramp-up of the new Barmer refinery in Rajasthan.
Higher refinery output could in turn support increased exports of diesel, jet fuel and petrol, strengthening one of India’s most important export industries.
Yet even as the immediate crisis begins to ease, former Reserve Bank of India governor Raghuram Rajan says the Hormuz disruption should serve as a “wake-up call” about how vulnerable the world remains to supply disruptions.
The strait is a critical artery for India’s economy, carrying a substantial share of the country’s LNG, LPG and crude imports. Speaking to ET Now, Rajan said India needs much larger petroleum reserves to protect itself from future disruptions.
He also called for more flexible backup options. China, he noted, has shown it can rapidly increase coal production during supply crises. India needs similar contingency plans while continuing its longer-term shift toward renewable energy.
But Rajan cautions that renewable energy brings vulnerabilities of its own because India remains heavily dependent on imported solar cells, panels and wind power components.
The wider lesson is that India cannot afford to depend too heavily on any single supplier, trade route or commodity, and that warning extends beyond energy.
Policymakers and industry leaders need to build strategic buffers for other critical imports, such as pharmaceutical raw materials, Rajan notes. The bulk of the basic ingredients used by India’s pharmaceutical industry come from China.
