The Minister of Petroleum and Natural Gas, Mr Hardeep Singh Puri, said last week that 67% of India’s liquefied petroleum gas (LPG) came from the U.S.
Although he didn’t mention the timeframe for when energy-hungry India “achieved” this, it is clearly a drastic shift from an earlier government decision to source about 10% of cooking gas from the U.S.
As part of crisis management, India, the world’s second-largest importer of LPG, started buying cooking gas from the U.S., backed by a long-term deal signed for 2.2 million tonnes for 2026 by state-run oil refiners, even as finer details on exact contracted $/tonne or landed cargo price have not been publicly disclosed.
India’s reliance on the U.S. for two-thirds of its LPG assumes significance, signalling prudent diversification of sources amid the crisis in the narrow Strait of Hormuz, which suggests that the country’s LPG security cannot be anchored to a single geography.
As per Vortexa, India’s LPG imports from West Asia fell almost 85% between February 2026 and June. However, India partially offset the lost flows by increasing LPG imports from other countries, including the U.S., from where India’s imports in June reached 0.77 million metric tonnes, up 19.4% from May.
As per the Petroleum Planning and Analysis Cell (PPAC), total imports of LPG in the first quarter of 2026 stood at 2.85 million tonnes, valued at $2,328 million.
Frying pan to fire
Overdependence on any market is risky, but relying more on a nation which keeps amorphous relations and sees partners through the lens of national interest could prove costly, as it may wield energy as a bargaining tool in bilateral trade talks. Energy-import dependence also makes monetary policy more complicated.
The U.S. has historically used financial sanctions, export controls and technology as foreign policy tools, going by the episodes in Iran, Iraq, Cuba, North Korea, Syria, Russia, Venezuela, Myanmar, Libya, Sudan and Afghanistan.
Even when commercial ties are extant, the U.S. can influence third-country transactions. The Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, proposing tariffs of up to 100% on the top five buyers of Russian oil and natural gas, is a non-tariff trade barrier.
Some analysts are of the view that Washington reaped pecuniary benefits from Europe’s shift to U.S. LNG after the Russia-Ukraine war, and its energy exports have always made stronger inroads during periods of geopolitical instability.
“The pivot away from Russian gas has increased the EU’s strategic dependency on US LNG, the most expensive LNG for EU buyers,” said the Institute for Energy Economics and Financial Analysis.
Proximity pricing
Unlike the West Asian supplies, largely based on long-term SPAs, U.S. energy exports could potentially be swayed by trade and other agendas, enhancing dependence risks. Traditionally leaning towards the Gulf region, India, which imports about 60% of the LPG (a mix of propane and butane) it consumes, with nearly 90% of which passing through the Strait of Hormuz, could lose the advantage of proximity pricing as the voyage time is generally 25-35 days for the U.S. shipments against 5-10 days from the Gulf.
Although the U.S. LPG (Mont Belvieu propane-based) claims a competitive edge over West Asian supplies; the reality is that the former could be cheap at the point of production, but the West Asian LPG (Saudi Aramco CP) is usually cheaper at the disembarking point because of the much shorter shipping distance although the arithmetic has changed now due to geopolitical risk temporarily inflating the West Asian supply costs.
Political fuel
For India, cooking gas is not merely a good but a politically volatile fuel, the shortages of which would have social and political consequences; and so the priority is making it available rather than cost optimisation.
The Strait of Hormuz disruptions have led to Gulf LPG prices surging sharply, with Saudi CP rising from about $543 a tonne in February to around $790 in June — an increase of about 46%. Under such conditions, even costlier US cargoes would become attractive because they were available and has reduced supply risk.
Higher Gulf benchmark, shipping disruptions and risk premia can make the U.S. LPG competitive despite its longer voyage.
India may have cut Hormuz risk, but remains exposed to risks associated with commodity-price, dollar and freight.
If U.S. inflation remains elevated, the Federal Reserve may have to keep interest rates higher for longer. Tighter U.S. monetary policy can simultaneously strengthen the dollar, raising the rupee cost of each imported cargo.
If domestic LPG prices are held down when the global price rises amid rupee depreciation, then oil companies’ under-recoveries expand, leading to more fiscal and external-sector issues.
The government recently informed the Parliament that the accumulated under-recoveries of public sector OMCs scaled to more than ₹59,000 crore as of July 31 this year.
Domestic scene
The PPAC data suggests that as of July 1, 2026, the PSU OMCs (Indian Oil, Bharat Petroleum and Hindustan Petroleum) together have 33.14 crore active domestic LPG customers, with a compound annual growth rate (CAGR) of 7.6% during 2015–2026. The original LPG consumption estimate is 34,692 TMT for 2026-27.
India’s LPG production, which remained nearly stagnant over the past several years, has not been keeping pace with consumption growth. While LPG production was 4.3 MMT (million metric tonnes), consumption was 6.5 MMT in the first quarter of FY27.
Refineries were directed to maximise the LPG output by diverting propane, butane and other streams into the LPG pool. As per Q1FY27, LPG production saw 35.73% year-on-year increase to a total of 4.26 MMT.
At the peak of the crisis, India’s OMCs ramped up their cumulative daily production of LPG from 34,000 metric tonnes (MT) to 55,000 MT, which helped the country absorb some impact of lower imports.
Steps needed
Australia offers strategic advantages as it is in the Indo-Pacific, outside Hormuz, and has a shorter route than the U.S., but export volumes are much smaller.
Argentina, Nigeria and Angola can be probable markets that can offer strategic agility, though they cannot replace the Gulf volumes.
Energy security is not about replacing one with another; it is about ensuring that no single player holds all the cards. Instead, India must strengthen local production, bolster multiple supply chains, enhance forex hedging tools (for the OMCs) and build more strategic reserves.
