How India averted energy crisis during Strait of Hormuz disruption
India successfully avoided a major energy crisis during the four-month Strait of Hormuz disruption by securing alternative fuel supplies, expanding domestic production, leveraging years of energy infrastructure investments and shielding consumers through subsidies and tax cuts.
India averted a major energy crisis despite the disruption of the Strait of Hormuz following the military conflict in West Asia that began on February 28, 2026. The closure of the strategic waterway, through which nearly 20 percent of the world's seaborne crude oil and significant volumes of LPG and LNG are transported, posed a serious challenge for India, which depends on imports for nearly 90 percent of its crude oil requirements and around 60 percent of its LPG demand.
Despite the disruption, the country avoided fuel shortages at petrol pumps, maintained uninterrupted domestic LPG supplies and protected consumers from the full impact of soaring global energy prices. Long-term investments in energy infrastructure, diversification of supply sources, coordinated diplomacy and swift policy decisions enabled India to navigate one of its biggest energy security challenges in recent years.
GLOBAL PRICES SURGED AFTER HORMUZ CLOSURE
The closure of the Strait of Hormuz triggered a sharp rise in international energy prices. India's crude oil basket increased from around $70 per barrel to more than $120 per barrel, while Brent crude climbed to $126 per barrel. Saudi Arabia's LPG contract price rose by nearly 46 percent, pushing the import cost of a 14.2 kg domestic LPG cylinder above Rs 1,600. War-risk insurance premiums for oil tankers also increased several-fold.
The crisis left India facing three immediate challenges—ensuring uninterrupted energy supplies, containing domestic fuel prices and maintaining public confidence.
INFRA EXPANSION STRENGTHENED ENERGY SECURITY
India's investments in energy infrastructure over the past decade proved crucial during the crisis.
Between 2014 and 2026, the number of LPG import terminals increased from 11 to 22, while the LPG pipeline network expanded from 2,311 km to 6,242 km. LPG import capacity nearly tripled to 32.3 MMTPA. The number of countries supplying crude oil to India increased from 27 to 41.
During the same period, LNG terminals doubled from four to eight, city gas distribution networks expanded from 55 to more than 300 and India developed a strategic petroleum reserve with a storage capacity of 5.33 million tonnes.
DIPLOMATIC OUTREACH SECURED ALTERNATIVE SUPPLIES
Soon after the crisis began, the government formed an inter-ministerial coordination group comprising the Ministry of External Affairs, the Ministry of Petroleum and Natural Gas, the Ministry of Ports, Shipping and Waterways and the Indian Navy.
The group identified oil, LPG and LNG vessels carrying Indian cargo that had become stranded near the Strait of Hormuz and coordinated with Iranian authorities to ensure their safe passage. Continuous engagement between Indian diplomatic missions and Iranian officials enabled India to secure safe transit for its vessels without additional charges or transit taxes.
At the same time, the Petroleum Minister visited Qatar, the External Affairs Minister travelled to the United Arab Emirates and the National Security Adviser visited Saudi Arabia. India also secured alternative energy supplies from Russia, Brazil, Algeria, Venezuela, Canada, Japan and the United States.
An LPG import agreement with the United States and access to strategic petroleum reserves in other countries further strengthened India's energy security.
GOVERNMENT LIMITED FUEL PRICE INCREASES
Despite record crude oil prices in the international market, the government prevented the entire burden from being passed on to consumers.
On March 27, 2026, the Centre reduced excise duty on petrol and diesel by Rs 10 per litre, resulting in an estimated revenue loss of around Rs 1.7 lakh crore.
Oil marketing companies absorbed losses for more than two months without increasing retail fuel prices. When a price revision became unavoidable, they increased petrol and diesel prices by only Rs 3 per litre.
As a result, India recorded one of the lowest increases in petrol and diesel prices among major oil-importing economies during the crisis.
LPG SUPPLY REMAINED UNINTERRUPTED
LPG was expected to face the biggest disruption because a significant share of India's imports originates from Gulf countries.
On March 8, the government issued an LPG Control Order directing all refineries to maximise LPG production. Within seven days, domestic LPG production increased from 35,000 tonnes per day to 54,000 tonnes per day. Refineries that had not previously produced LPG were also prepared to begin production.
Although the import cost of a 14.2 kg LPG cylinder exceeded Rs 1,600, the retail price for domestic consumers remained at Rs 942. Beneficiaries of the Pradhan Mantri Ujjwala Yojana continued to receive a subsidy of Rs 300 per cylinder, reducing the effective price to Rs 642. More than 10.58 crore families benefited from the scheme.
The government and oil marketing companies absorbed thousands of crores of rupees in additional costs to shield consumers from higher prices.
DEMAND MANAGEMENT REDUCED PRESSURE
The government complemented supply-side measures with demand management initiatives.
It restricted commercial LPG consumption, shifted industries to piped natural gas wherever possible, allowed large establishments to temporarily use alternative fuels and made 5 kg free-trade LPG cylinders available for migrant workers.
These measures reduced daily LPG demand from around 90,000 tonnes to nearly 70,000 tonnes.
NATURAL GAS NETWORK EASED THE BURDEN
The expansion of India's natural gas infrastructure also helped during the crisis.
The growth of city gas distribution networks and LNG terminals enabled uninterrupted supply of piped natural gas to domestic and industrial consumers. This reduced dependence on imported LPG and ensured uninterrupted cooking gas supplies across the country.
GOVERNMENT ABSORBED THE FINANCIAL BURDEN
The government's strategy throughout the crisis focused on preventing global energy prices from directly affecting consumers.
It absorbed substantial costs through reductions in fuel taxes, LPG subsidies and financial support to oil marketing companies. Oil marketing companies are expected to incur losses of Rs 1 lakh crore to Rs 1.2 lakh crore during the current quarter despite continued consumer relief measures.
ECONOMY REMAINED RESILIENT
India's broader economy remained stable throughout the energy crisis.
Foreign exchange reserves stayed above a record $728 billion, real GDP growth remained around 7.6 percent, the current account deficit stayed under control and retail inflation remained within the Reserve Bank of India's target range.
These indicators reflected the country's ability to maintain both energy security and overall macroeconomic stability despite severe global disruptions.
INDIA STOOD OUT DURING THE GLOBAL CRISIS
Several major economies adopted emergency measures to deal with the energy shock. Japan released nearly 80 million barrels of crude oil from its strategic reserves, South Korea imposed fuel price controls and countries including the United Kingdom witnessed steep increases in petrol and diesel prices.
In contrast, India maintained uninterrupted energy supplies without fuel rationing, declaring an emergency or reducing working days while keeping fuel price increases comparatively lower.
India averted a major energy crisis despite the disruption of the Strait of Hormuz following the military conflict in West Asia that began on February 28, 2026. The closure of the strategic waterway, through which nearly 20 percent of the world's seaborne crude oil and significant volumes of LPG and LNG are transported, posed a serious challenge for India, which depends on imports for nearly 90 percent of its crude oil requirements and around 60 percent of its LPG demand.
Despite the disruption, the country avoided fuel shortages at petrol pumps, maintained uninterrupted domestic LPG supplies and protected consumers from the full impact of soaring global energy prices. Long-term investments in energy infrastructure, diversification of supply sources, coordinated diplomacy and swift policy decisions enabled India to navigate one of its biggest energy security challenges in recent years.
GLOBAL PRICES SURGED AFTER HORMUZ CLOSURE
The closure of the Strait of Hormuz triggered a sharp rise in international energy prices. India's crude oil basket increased from around $70 per barrel to more than $120 per barrel, while Brent crude climbed to $126 per barrel. Saudi Arabia's LPG contract price rose by nearly 46 percent, pushing the import cost of a 14.2 kg domestic LPG cylinder above Rs 1,600. War-risk insurance premiums for oil tankers also increased several-fold.
The crisis left India facing three immediate challenges—ensuring uninterrupted energy supplies, containing domestic fuel prices and maintaining public confidence.
INFRA EXPANSION STRENGTHENED ENERGY SECURITY
India's investments in energy infrastructure over the past decade proved crucial during the crisis.
Between 2014 and 2026, the number of LPG import terminals increased from 11 to 22, while the LPG pipeline network expanded from 2,311 km to 6,242 km. LPG import capacity nearly tripled to 32.3 MMTPA. The number of countries supplying crude oil to India increased from 27 to 41.
During the same period, LNG terminals doubled from four to eight, city gas distribution networks expanded from 55 to more than 300 and India developed a strategic petroleum reserve with a storage capacity of 5.33 million tonnes.
DIPLOMATIC OUTREACH SECURED ALTERNATIVE SUPPLIES
Soon after the crisis began, the government formed an inter-ministerial coordination group comprising the Ministry of External Affairs, the Ministry of Petroleum and Natural Gas, the Ministry of Ports, Shipping and Waterways and the Indian Navy.
The group identified oil, LPG and LNG vessels carrying Indian cargo that had become stranded near the Strait of Hormuz and coordinated with Iranian authorities to ensure their safe passage. Continuous engagement between Indian diplomatic missions and Iranian officials enabled India to secure safe transit for its vessels without additional charges or transit taxes.
At the same time, the Petroleum Minister visited Qatar, the External Affairs Minister travelled to the United Arab Emirates and the National Security Adviser visited Saudi Arabia. India also secured alternative energy supplies from Russia, Brazil, Algeria, Venezuela, Canada, Japan and the United States.
An LPG import agreement with the United States and access to strategic petroleum reserves in other countries further strengthened India's energy security.
GOVERNMENT LIMITED FUEL PRICE INCREASES
Despite record crude oil prices in the international market, the government prevented the entire burden from being passed on to consumers.
On March 27, 2026, the Centre reduced excise duty on petrol and diesel by Rs 10 per litre, resulting in an estimated revenue loss of around Rs 1.7 lakh crore.
Oil marketing companies absorbed losses for more than two months without increasing retail fuel prices. When a price revision became unavoidable, they increased petrol and diesel prices by only Rs 3 per litre.
As a result, India recorded one of the lowest increases in petrol and diesel prices among major oil-importing economies during the crisis.
LPG SUPPLY REMAINED UNINTERRUPTED
LPG was expected to face the biggest disruption because a significant share of India's imports originates from Gulf countries.
On March 8, the government issued an LPG Control Order directing all refineries to maximise LPG production. Within seven days, domestic LPG production increased from 35,000 tonnes per day to 54,000 tonnes per day. Refineries that had not previously produced LPG were also prepared to begin production.
Although the import cost of a 14.2 kg LPG cylinder exceeded Rs 1,600, the retail price for domestic consumers remained at Rs 942. Beneficiaries of the Pradhan Mantri Ujjwala Yojana continued to receive a subsidy of Rs 300 per cylinder, reducing the effective price to Rs 642. More than 10.58 crore families benefited from the scheme.
The government and oil marketing companies absorbed thousands of crores of rupees in additional costs to shield consumers from higher prices.
DEMAND MANAGEMENT REDUCED PRESSURE
The government complemented supply-side measures with demand management initiatives.
It restricted commercial LPG consumption, shifted industries to piped natural gas wherever possible, allowed large establishments to temporarily use alternative fuels and made 5 kg free-trade LPG cylinders available for migrant workers.
These measures reduced daily LPG demand from around 90,000 tonnes to nearly 70,000 tonnes.
NATURAL GAS NETWORK EASED THE BURDEN
The expansion of India's natural gas infrastructure also helped during the crisis.
The growth of city gas distribution networks and LNG terminals enabled uninterrupted supply of piped natural gas to domestic and industrial consumers. This reduced dependence on imported LPG and ensured uninterrupted cooking gas supplies across the country.
GOVERNMENT ABSORBED THE FINANCIAL BURDEN
The government's strategy throughout the crisis focused on preventing global energy prices from directly affecting consumers.
It absorbed substantial costs through reductions in fuel taxes, LPG subsidies and financial support to oil marketing companies. Oil marketing companies are expected to incur losses of Rs 1 lakh crore to Rs 1.2 lakh crore during the current quarter despite continued consumer relief measures.
ECONOMY REMAINED RESILIENT
India's broader economy remained stable throughout the energy crisis.
Foreign exchange reserves stayed above a record $728 billion, real GDP growth remained around 7.6 percent, the current account deficit stayed under control and retail inflation remained within the Reserve Bank of India's target range.
These indicators reflected the country's ability to maintain both energy security and overall macroeconomic stability despite severe global disruptions.
INDIA STOOD OUT DURING THE GLOBAL CRISIS
Several major economies adopted emergency measures to deal with the energy shock. Japan released nearly 80 million barrels of crude oil from its strategic reserves, South Korea imposed fuel price controls and countries including the United Kingdom witnessed steep increases in petrol and diesel prices.
In contrast, India maintained uninterrupted energy supplies without fuel rationing, declaring an emergency or reducing working days while keeping fuel price increases comparatively lower.
