New York: A shortage of cooking gas in India and record-high gasoline prices in California are linked by the same global turmoil: the US-Israeli war with Iran. The conflict has disrupted energy trade worldwide, helping push up fuel prices in California above $6 a gallon while Indians struggle to cook at home, Reuters reported.
Iran’s near-closure of the Strait of Hormuz has thrown global supply shock, cutting off roughly one-fifth of the oil that passed through the waterway before the war. That disruption has forced buyers to tap stockpiles and take emergency steps to manage fuel shortages.
India’s Supply Shift
India, the world’s most populous country, relies on liquefied petroleum gas (LPG) as its main cooking fuel. Before the Iran war, more than 90% of India’s LPG imports came from the Middle East. With those supplies now disrupted, New Delhi ordered refiners to maximize LPG output for domestic use. To do that, refiners have reduced production of alkylates — motor-fuel additives that use LPG as feedstock.
Ripple Effects For California
California’s gasoline market is already under pressure, and lower alkylate supplies are making it worse. Asian refiners have cut production and exports after losing access to Middle Eastern crude. Since alkylates burn cleaner and California needs a special fuel blend to reduce smog, the shortage is pushing prices up.
“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,” said Mason Hamilton, chief economist for the American Petroleum Institute industry group.
India Prioritizes Cooking Fuel
Indian refiners’ decision to cut alkylate exports could not have come at a worse time for California. Motorists in the state are already paying the highest gasoline prices since 2022 amid the global fuel shortage caused by the war. GasBud
dy analyst Patrick De Haan warned that lower alkylate supplies will likely push prices higher as demand rises during the summer driving season.
“The more acute the alkylate supply shortfall becomes, the higher it could push prices in California,” De Haan said.
A California Energy Commission (CEC) spokesperson said the state is aware of India’s shifting priorities but believes it currently has a healthy supply of gasoline and blending components and does not foresee a shortfall. The agency is monitoring conditions, the spokesperson added.
California price pressures
California’s average retail motor fuel price was $6.14 per gallon on Friday, after peaking at $6.16 on May 7, GasBuddy data show. The state’s gasoline stockpiles are near record lows. De Haan said prices could cross $6.50 in the coming weeks.
US environmental laws require cleaner-burning gasoline blends during the summer, and California has the strictest mandate. That raises costs compared with the national average, said Nikhil Dubey, lead research analyst at Kpler. GasBuddy reported that the US national average was $4.52 a gallon on Friday.
Lives Disrupted In India
India has limited options to keep supplying alkylates while meeting domestic cooking fuel needs. The LPG shortage is so severe that people wait hours for cylinders and sometimes turn to the black market. Businesses and restaurants have warned they may have to shut if supplies do not improve.
Reliance, which operates the world’s largest refinery in Jamnagar, Gujarat, has cut alkylate output and exports to boost LPG production. India’s alkylate exports fell to 33,000 barrels per day in April, about half of March’s 61,000 bpd and the lowest since October 2023.
Few Relief Options
Like New Delhi, California has limited ways to reduce pump prices while the war continues. Temporary measures such as tax waivers would likely increase demand and worsen the alkylate shortage, De Haan said.
“You can’t put more pressure on a system struggling under the existing weight on it,” De Haan said.
For Governor Gavin Newsom, GasBuddy’s De Haan said the only realistic option may be to waive the state’s fuel specifications to lower the need for alkylates.
“His hands are tied. That’s the only choice he has,” De Haan said.
The CEC said it does not believe a waiver of blending rules would help the state.