Impact of Surging Crude Oil Prices

The surge in international crude oil prices, exceeding $100 per barrel due to the West Asia conflict, is impacting commercial users of LPG and industrial users of LNG, particularly in major Indian cities and industrial hubs.

LPG and LNG Supply Challenges

• Domestic Supply Prioritization: Refiners and fuel retailers are directed to prioritize domestic LPG supply to households over commercial users, resulting in supply tightness.
• Essential Services Prioritization: Imported LPG supplies are prioritized for essential services, including hospitals and educational institutions.
• Booking Wait Period Extension: The minimum waiting period for booking an LPG cylinder has been increased from 21 to 25 days to prevent hoarding and black marketing.
• Government Committee: A committee of executive directors from oil marketing companies has been established to review LPG supply representations for restaurants, hotels, and industries.
• Emergency Powers: The government invoked the Essential Commodities Act to maximize LPG production and ensure domestic supply.

Economic and Industrial Effects

• Stock Levels: India has six to eight weeks of crude and fuel stocks, with continuous replenishment from non-West Asian regions.
• Industrial Impact: Morbi, Gujarat, a major ceramic manufacturing hub, is severely affected by gas shortages, leading to partial shutdowns of manufacturing units.
• Commercial Impact: Restaurants in major cities report LPG shortages and rising black market prices.

Financial Market and Currency Impact

• Stock Market Tumble: Stock indices fell nearly 3% due to oil price surges, with a cumulative fall of 5.69% since the US-Israel-Iran conflict began.
• Currency Depreciation: The rupee hit a record low against the dollar, declining 2.62% since January 1, influenced by crude price fluctuations.

Fuel Price Stability

• Price Freeze Policy: Despite crude oil price increases, retail prices of petrol and diesel remain flat since April 2022, with state-owned oil companies absorbing global price jumps.
• Inflation Impact Mitigation: Continued price stability is intended to mitigate the inflationary impact of rising oil prices.