India's gas troubles: Overreliance on the Middle East.

Today, many countries, their governments, their think tanks and their policy documents harp over one thing that many members of the public may find to be a bit highbrow, but can affect them in ways the highbrow language can never suggest explicitly. The concept of “energy security” today is one of the primary concerns of the emerging global order. The producers of energy are few and far between, but they are the ones who hold disproportionate leverage over the global economy.

A common citizen can now feel the weight of the words “energy security” on their very own food plates, or rather, by a lack of it. Today, the massive tripartite war between the US and Israel on one side and Iran on the other, has put into jeopardy the very energy security that entire policies, frameworks, groups, alliances have been looking to ensure, and turned the entire energy ecosystem on its head.

Millions of dollars, groups of the most powerful countries, and the policies of even the most effective leaders, are no match for pure geography. Today, one small 33-km wide body of water, the Strait of Hormuz, is holding billions, if not trillions of dollars hostage in its waters. The Islamic Revolutionary Guard Corps of Iran is now managing to enforce a never-before-seen blockade to force the US and Israel to surrender, but the largest consumers of energy in Asia, those being China and India, are being caught in the crossfire.

India, being the most populous nation on Earth, and as the fastest growing major economy in the world, has exceptionally higher stakes in the energy security game, not only to ensure growth, but also sustenance of its massive population. Today, India has one of the most diverse supplier rosters of any nation on Earth in terms of crude oil, and combined with its remarkable competence in refining capabilities, ensures that India remains largely unaffected by the Hormuz blockade on the crude oil and petroleum front.

However, the prudence shown by the Indian government on the supply of crude oil, has not been able to transfer itself to Liquefied Petroleum Gas or LPG, and is thus manifesting as crippling shortages across the nations, with commercial dining establishments having to quite literally shutter their operations due to a lack of commercial gas, or risk paying double or almost triple the price while either passing on the increased cost to consumers or taking a massive hit to their margins, but mostly both.

The question may arise, that when India has robust Strategic Petroleum Reserves (SPRs) that can last for months on end, even if supply is completely cut off, why couldn’t India make such arrangements for LPG as well? The logistical concerns quickly answer this question. LPG is a mix of propane and butane gases, that have to be stored in specialized conditions, usually in very low temperatures, and highly pressurized containers. Thus, due to India’s lack of investment on logistical infrastructure for LPG storage, the LPG crisis appears relatively acute compared to the non-crisis of more traditional liquid fuels, simply because the groundwork was laid for them decades ago.India today imports around 35-36% of its crude from Russia alone, along with many African suppliers, which has enabled the government to quickly transition to either Vladivostok origin, or Suez routed alternatives for its crude. However, its natural gas supplier roster hasnt been this diverse, with Qatar, a major player in the Strait of Hormuz alone being responsible for 34% of India’s LPG imports, with the UAE and Saudi Arabia closely following. India possesses long-term buying contracts with these countries, thus choosing price stability over supply stability (or diversification to ensure stability), by making a bet on the peace in the Strait of Hormuz. But as is apparent, the bet has backfired, now leaving ~330 million households scrambling for a basic commodity.

The current Indian government has also made efforts to increase the penetration of household cooking gas as opposed to sources such as kerosene or firewood, but has on the surface looked to have failed to ensure proper investment on the public infrastructure required to sustain the demand of the surge of households dependent on LPG as their primary source of cooking fuel, and thus has committed a critical strategic miscalculation.This crisis is a masterclass in the art of energy supply diversification, and ensuring adequate strategic reserves in such a rapidly growing nation as India and ensuring that its energy needs are satisfied by a robust variety of suppliers to ensure that such geographic, political or economic shocks do not rear their heads down the line as strategic vulnerabilities for which the common man has to pay the price.