For decades, the global energy economy has functioned on the tacit assumption that the Strait of Hormuz would always remain open. That assumption has been fundamentally shaken this year.

The disruption has been without precedent. The 1973 Arab oil embargo 1973 endured for five months but never resulted in the closure of the strait. During the tanker war phase of the 1980-88 Iran-Iraq conflict, shipping traffic was constrained, though not completely interrupted. Likewise, the 2019 drone attacks on Saudi Arabia’s Abqaiq facility caused only a temporary disruption before supplies stabilised. In all these earlier episodes, the shock to global energy markets lasted only a short time. The present crisis, however, has extended well beyond two months and increasingly appears to be a disruption with no immediate resolution.

For India, the exposure has been severe, with a significant share of crude oil imports and LPG and LNG volumes transiting through the strait. Within eight days of the disruption, the government issued the LPG Control Order. Refineries were directed to maximise LPG yields to meet domestic demand, despite such production being uneconomical under normal circumstances. LPG production was increased from 36,000 MT to 54,000 MT per day. On the demand side, priority was accorded to protecting supplies for domestic consumers. Similarly, in the natural gas sector, domestic PNG and transportation CNG were prioritised. Export duties were imposed to protect supplies to the domestic market.

Over the past two months, global crude oil prices have risen by 80-100 per cent, topping $120 at times, with product........

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