India LPG shortage cuts alkylate exports, lifts US gas

A disruption spanning kitchens and fuel pumps

India’s shortage of cooking gas and California’s surge in gasoline prices above $1 a gallon are being linked through a single supply chain squeeze. The disruption follows the U.S.-Israeli war with Iran and shipping constraints around the Strait of Hormuz. The article describes it as the worst-ever energy supply disruption, with knock-on effects moving across products, regions, and end-users. In India, liquefied petroleum gas (LPG) is a household staple for cooking. In California, cleaner-burning gasoline requirements make certain blending components difficult to substitute. The result is a two-way pressure point, where steps to protect domestic supply in one market deepen shortages in another.

Strait of Hormuz shock and global trade knock-ons

The near-closure of the Strait of Hormuz has thrown energy trade flows off balance, affecting crude oil and LPG supply routes. The Strait previously carried around one-fifth of the world’s oil supply before the war, according to the text. Asian refiners have faced difficulty accessing Middle Eastern crude, contributing to declining fuel production and exports. That drop in Asian fuel exports directly tightens California’s gasoline supply chain. At the same time, LPG-importing countries have had to scramble for replacement volumes, intensifying competition for the same molecules.

India’s reliance on Middle Eastern LPG

India uses LPG as its primary cooking fuel and had been heavily dependent on Middle Eastern supply. Before the Iran war, Middle Eastern LPG represented over 90% of India’s total LPG imports, the report said. Separately, the text also notes India is heavily dependent on imported LPG, including roughly 60% of its LPG overall, and that about 90% of imported volumes pass through the Strait of Hormuz. As disruptions mounted, New Delhi directed refiners to maximise LPG output to shore up domestic availability. The domestic shortage has been acute enough that people queued for hours for LPG cylinders, sometimes being turned away and pushed towards black market purchases.

Refiners maximise LPG by cutting alkylate output

The policy response in India has created a downstream constraint: refiners cut alkylate production because alkylates are made using LPG as feedstock. Alkylates are used as motor fuel additives, and India has been a supplier to overseas markets including the U.S. West Coast. With India’s LPG supply constrained by the closure of the Strait of Hormuz, refiners have produced and exported less alkylate, said Mason Hamilton, chief economist at the American Petroleum Institute. The report frames this as an example of how attempts to relieve one shortage can “spread the pain” elsewhere. For global markets, it illustrates how refining choices can shift scarcity from cooking fuel to gasoline blend components.

Reliance’s Jamnagar refinery and export reductions

Reliance, which operates the world’s largest refinery in Jamnagar, Gujarat, said it was cutting alkylate output and exports to maximise LPG production. The scale of India’s export pullback is visible in shipping and tracking data cited in the report. India’s total alkylate exports fell to 33,000 barrels per day in April, about half of the 61,000 bpd exported in March. The April level was the lowest since October 2023, according to Kpler data. The timing matters because it coincides with a period when gasoline markets typically tighten ahead of peak summer demand.

Why California is sensitive to alkylate supply

California’s gasoline market is structurally exposed because the state requires a unique gasoline blend to reduce smog. Alkylates are highly sought in California because they burn cleaner than other additives and are important for meeting specifications. With shrinking alkylate supply, California faces what the report calls a “double whammy” from the war. First, lower Asian fuel exports hit supply availability. Second, additives needed for California’s blend are harder to procure because India is conserving cooking fuel.

Prices at the pump and the summer demand risk

California motorists were already paying the highest prices since 2022 amid the global fuel supply crisis linked to the war, the report said. California’s average retail motor fuel price was $1.14 per gallon on Friday, after reaching $1.16 on May 7, an over three-year high, according to GasBuddy data. The U.S. national average was $1.52 per gallon on Friday, GasBuddy data showed. GasBuddy analyst Patrick De Haan said prices could cross $1.50 in the coming weeks, and that a deeper alkylate shortfall could push prices higher in California. The report also notes California gasoline stockpiles hovering near record lows.

Regulation and limited policy options

U.S. environmental laws require cleaner-burning gasoline blends during the peak summer season, adding to costs, and California has the strictest mandate, said Kpler lead research analyst Nikhil Dubey. The California Energy Commission said it is aware of India’s evolving priorities but has a healthy supply of gasoline and blending components. The CEC does not foresee a shortfall, but said it is monitoring the situation. De Haan said measures such as tax waivers could boost demand and deepen the alkylate shortage, potentially worsening price shocks. He added that Governor Gavin Newsom’s only viable option to tame fuel prices may be to waive the state’s fuel specifications to reduce the need for alkylates.

India’s domestic price pressures spill into consumers and businesses

The report describes strain on Indian households and businesses, including restaurants that warned they could be forced to shutter. Another section of the provided text notes a sharp rise in commercial LPG prices for a 19-kg cylinder used by restaurants in Delhi, from Rs 1,740.5 to Rs 3,071.50. Separately, Indian Oil Corporation (IOCL) said prices of bulk and commercial LPG cylinders had been revised, and its price chart showed an increase of 993 rupees for a 19-kg commercial cylinder in New Delhi, amounting to a nearly 48% rise, with local levies varying by city. IOCL also said jet fuel for international airline operations had been adjusted upward, with aviation turbine fuel up around 5% in Delhi, according to IOCL’s catalogue.

Key figures referenced in the report

What investors and industry watchers should track

For Indian markets, the operational shift towards LPG over refining intermediates highlights how geopolitical shocks can alter product slates and export realisations. Reliance’s decision to cut alkylate output and exports to maximise LPG production is one concrete example cited. For global fuel markets, California’s dependence on specific blending components shows how regulatory specifications can amplify price sensitivity during supply disruptions. The key indicators in the coming weeks, as described in the text, are alkylate availability, California inventories, and whether policymakers consider a temporary fuel specification waiver.

Conclusion

The report ties India’s LPG shortage and California’s gasoline spike to the same war-driven disruption in Middle East supply routes. India’s push to protect cooking fuel supply is reducing alkylate exports, tightening a key input for California’s unique gasoline blend. California officials say supplies remain healthy, but analysts warn prices could rise further if the alkylate shortfall deepens into peak driving season. Next steps flagged in the report include continued monitoring by the California Energy Commission and the possibility of waiving fuel specifications if supply stress persists.