It is hard to predict the end of the West Asia war. Even after the agreed two-week ceasefire at the time of writing, a deep distrust will persist on all sides and the situation will simmer. Even after the war stops, the Gulf nations will not be able to immediately ramp up production because their infrastructure has been damaged in the attacks. So, energy shortages will persist even after the war ends.

The adverse impact on India is increasing by the day. Prices are rising and output is hit in several industries, most visibly restaurants and hotels. Migrant workers in cities are finding it difficult to procure/afford cooking gas and are perforce heading back to their villages, as they did during the Covid pandemic.

As the war or war-like conditions persist, the global energy supply shock will bite harder. Since all production, distribution and consumption requires energy, shortage of crude and gas will impact output. The present global crude and gas shortage is at least 10 per cent, in spite of increased supplies from alternative sources and other interventions like permission to buy Russian and Iranian oil on high seas and the Saudi East-West pipeline a.k.a. Petroline providing an outlet via the Red Sea.

Stocks of petroleum products in the pipeline and strategic stocks will last for a limited time. So, global production is getting hit and supply chains are being disrupted. Since the world’s dependence on petroleum products is far greater now than in the 1970s, during the Arab-Israeli war, the impact is greater.

Also, since all production activities, as well as transportation and distribution, require energy, an increase in energy prices has a cascading impact on all prices.

Further, crude oil is not just energy but also........

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