'Households doubly exposed': Economist Shamika Ravi flags India's dual petroleum dependency amid Hormuz closure

As global disruptions in oil supply persist due to the ongoing conflict in West Asia, Shamika Ravi, economist and Member of the Prime Minister's Economic Advisory Council, raised concerns on Tuesday over the growing vulnerability of Indian households. 

US-Israel-Iran war LIVE Updates

"The dual petroleum dependency: Indian households now depend on petroleum products for both cooking (LPG) and transport (petrol, diesel, fares). Together, LPG + Conveyance account for 7.5–10.2% of monthly budgets," Ravi said. This heavy reliance on petroleum products, she added, has made households "doubly exposed" to any oil supply disruption, a risk not present at this scale in 2011.

Also read: Hormuz disruptions: Govt sets priority gas allocations; full supply for homes and transport, cuts for industry

In 2011, rural LPG adoption was just 17% and conveyance 4.2%.

The economist pointed out that rural India, in particular, has witnessed a sharp rise in LPG adoption in recent years. In 2011, only 17.2% of rural households used LPG for cooking, but by 2023, this figure had jumped to 53.4%, according to a chart she shared on X. Urban areas, with a higher initial adoption rate, also saw growth from 70.9% in 2011 to 89.8% in 2023. 

Ravi's chart on LPG adoption reflects a major shift, with rural households benefiting the most from improved access to clean cooking fuel. In urban India, transport costs have become the largest household expenditure, surpassing even food staples like cereals and milk. In rural India, conveyance now ranks as the second-largest expense.

Amid disruptions to global gas supplies, particularly in the Strait of Hormuz, the government has revised the priority list for allocating domestically produced natural gas. LPG production, alongside CNG and piped gas, has been placed at the top of the list, ensuring these sectors are fully supplied before gas is allocated to other industries. Fertilizer production, tea industries, and manufacturing will receive a reduced but prioritised share of available gas.

Iran's move to shut the Strait of Hormuz, through which much of India's imported LNG and LPG passes, has disrupted energy flow. With US-Israeli strikes in Iran and Tehran's retaliatory actions, maritime traffic through the strait has sharply declined, affecting India's energy imports. The region is crucial, with nearly one-fifth of the world's oil and a third of global LNG shipments passing through it.