Rerouted, Not Resolved: A Theoretical and Distributional Analysis of the Israel–Iran War's Transmission into India's Fuel Crisis

Energy security is often imagined as a matter of large-scale engineering: pipelines stretching across continents, massive storage tanks, and the steady flow of oil and gas that powers a nation's economy. For decades, experts have treated this as a technical puzzle, focusing on how many barrels of fuel a country can buy and how to keep prices stable for everyone. However, a new perspective suggests that this view is incomplete. It misses the human element of the equation: how a disruption in a distant part of the world does not just rattle a national budget, but trickles down to the kitchen stove of a family struggling to make ends meet. When a geopolitical conflict blocks a critical shipping route, the shock does not hit every household equally. Some families absorb the cost through higher bills, while others are shielded by government subsidies, leaving the most vulnerable to face the brunt of the shortage. Understanding who bears the burden of a fuel crisis is just as important as knowing how much fuel is available.

In a recent study, researchers from Sharda University in India investigated exactly how a major geopolitical event in 2026—the war between Israel and Iran and the subsequent near-closure of the Strait of Hormuz—transmitted its effects into India's fuel system. The Strait of Hormuz is a narrow waterway through which a vast portion of the world's oil and gas passes. When the conflict threatened to block this passage, it created a massive disruption in the global supply of energy. India, which relies heavily on imported fuel, found itself in a precarious position. The researchers did not simply look at the price of gas at the pump; instead, they traced the path of the crisis from the blocked shipping lane all the way to the individual household. They wanted to see how the shock was absorbed, who paid for it, and whether the country's safety nets were strong enough to protect those who could least afford it.

The study reveals that the crisis was not a single event with a single outcome, but a complex chain of reactions that played out differently for different types of fuel and different groups of people. India imports nearly 88 percent of its crude oil, and a significant portion of its liquefied petroleum gas, or LPG, which is used for cooking, comes through that vulnerable strait. When the shipping lanes were threatened, the flow of fuel slowed dramatically. The researchers found that the Indian government responded by trying to keep the price of petrol and diesel steady for the public, absorbing the extra cost through its own finances. This meant that the price at the gas station did not jump immediately, but the cost was shifted to the national budget. However, this protection was not uniform. While petrol and diesel prices remained largely unchanged in the early stages of the crisis, the price of domestic LPG cylinders did rise. A standard 14.2-kilogram cylinder, which is the lifeline for millions of households, saw a price increase of 60 rupees in March 2026.

This difference in how prices moved highlights a critical vulnerability in India's energy system. The researchers point out that while the country has some ability to switch oil suppliers or use its strategic reserves, these options are much more limited for cooking gas. Unlike crude oil, which can be sourced from various places and refined locally, LPG has fewer alternatives and is harder to substitute. Consequently, the shock hit the cooking fuel supply harder than the transportation fuel supply. The study suggests that this disparity created a situation where the financial burden of the crisis was not shared equally. Wealthier households, who might use more petrol for their cars, benefited more from the government's decision to keep fuel prices stable. In contrast, poorer families, who rely on LPG for cooking and often live on tight budgets, faced a direct increase in their living costs. For many of these families, even a small rise in the price of a gas cylinder can mean the difference between cooking a meal and having to rely on cheaper, dirtier fuels like wood or dung.

To make sense of these uneven effects, the researchers developed a new way of looking at energy security. They combined ideas from supply chain management, which studies how networks handle disruptions, with theories of energy poverty, which examine how low-income families cope with high energy costs. They proposed a framework that tracks a crisis through five stages: the initial geopolitical shock, the vulnerability of the supply chain, the movement of prices and government spending, the different levels of exposure for various households, and finally, the policy responses. This approach allows them to see the crisis not just as a problem of national supply, but as a series of choices that determine who is protected and who is left exposed. They found that while the government did take steps to shield the population, such as continuing subsidies for the poorest families under a specific welfare program, the system was not perfect. The pressure was redirected from the consumer's wallet to the government's treasury, but for the most vulnerable, the relief was partial, and the risk of having to cut back on fuel remained high.

The study also examined how India tried to manage the situation. The government encouraged refiners to produce more gas and ordered that supplies be prioritized for domestic use, but these measures could not completely eliminate the shortage or the price pressure. The researchers noted that while India has been building up its strategic oil reserves, these stockpiles are still relatively small compared to the country's total needs. Furthermore, a portion of these reserves is held by private companies, which raises questions about whether the government can access them quickly enough in an emergency. The analysis suggests that India's resilience depends not just on having enough fuel, but on having the right kind of reserves and the ability to distribute them fairly. The researchers argue that future plans for energy security must account for these distributional realities. It is not enough to ensure that fuel is available in the country; policymakers must also ensure that the cost of that fuel does not fall disproportionately on the poor.

Ultimately, the paper concludes that the 2026 crisis exposed a structural weakness in India's energy architecture. The country's heavy reliance on a single, geopolitically unstable shipping route for its cooking gas creates a specific type of risk that standard economic models often overlook. The shock was rerouted away from retail prices for some fuels, but it was not resolved; instead, it was absorbed by the public finances and, to a lesser extent, by the households that could least afford it. The researchers emphasize that while they could not measure the exact number of families who suffered because of the price hike, the mechanisms that would cause such suffering were clearly in place. Their work serves as a call to action for a more nuanced approach to energy security, one that recognizes that a stable supply of energy is not just a matter of barrels and pipelines, but of justice and equity. By understanding how a crisis travels through a system to reach the most vulnerable, governments can design better safety nets and build a more resilient future.