Why did India raise LPG prices during the West Asia crisis?

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India Increased LPG Prices Amidst Supply Disruptions from West Asia Crisis

India raised the prices for liquified petroleum gas (LPG), a crucial cooking fuel for millions of households, during the West Asia crisis due to the disruption of energy supplies. The closure of the Strait of Hormuz, a vital transit point for oil and gas, significantly impacted the availability of LPG, which India heavily imports, primarily from the Middle East. This reduction in supply, in the face of sustained demand, naturally led to upward pressure on prices.
Impact of Strait of Hormuz Closure on LPG Supply

The West Asia crisis, triggered by the US-Iran war, led to the closure of the Strait of Hormuz, a waterway through which approximately one-fifth of global oil and gas typically passes. As India's second-largest LPG importer, with a substantial portion of its supply originating from the Middle East, this disruption directly affected the volume of LPG available in the country. This created a scarcity that contributed to the price hike.
Economic Principles of Supply and Demand

In economics, when the supply of a commodity decreases while demand remains constant or increases, the price tends to rise. India's reliance on Middle Eastern LPG means that any disruption to this supply chain has a direct and immediate effect on the domestic market. The government's decision to increase LPG prices during this period reflects the market's response to reduced availability and the increased cost of securing remaining supplies.
Government Measures to Alleviate Supply Pressure

In response to the broader energy supply pressures exacerbated by the crisis, India also approved a significant plan to expand coal gasification. This initiative, valued at nearly US$4 billion, aimed to provide an alternative energy source and ease the overall strain on the nation's energy supplies. The supply disruptions through the Gulf routes had already placed considerable pressure on India's economy, impacting growth forecasts.

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Why did India raise LPG prices during the West Asia crisis?

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