India's efforts to tackle a severe cooking gas shortage are now having ripple effects thousands of miles away, contributing to higher gasoline prices in California as refiners cut exports of key fuel blending components, according to a Reuters report.
The disruption stems from the ongoing Iran conflict, which has severely impacted global energy trade flows after the near-closure of the Strait of Hormuz, a route that previously carried nearly one-fifth of the world's oil supply. The resulting supply shock has forced countries to redraw fuel priorities, with India diverting refinery capacity toward liquefied petroleum gas (LPG), the country's primary cooking fuel.
Before the conflict, more than 90% of India's LPG imports came from the Middle East. However, supply disruptions prompted New Delhi to invoke emergency powers and direct refiners to maximise LPG production. To achieve that, refiners have reduced output of alkylates, premium gasoline blending components made using LPG feedstock.
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That shift is now tightening fuel supplies in California, where alkylates are crucial for producing the state's cleaner-burning gasoline blend mandated under strict environmental regulations. California is simultaneously grappling with reduced fuel imports from Asian refiners struggling to access Middle Eastern crude.
“With India's LPG supply constrained by the closure of the Strait of Hormuz, refiners there are producing and exporting less alkylate, adding pressure to an already tight California gasoline market,” Mason Hamilton, chief economist at the American Petroleum Institute, told Reuters.
According to data from Kpler cited in the report, India's alkylate exports dropped to 33,000 barrels per day in April, nearly half the 61,000 barrels per day exported in March and the lowest level since October 2023.
Reliance Industries, which operates the world's largest refinery complex in Jamnagar, Gujarat, said earlier this month that it was reducing alkylate production and exports to maximise LPG output.
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California gasoline prices have already surged to multi-year highs amid the broader fuel crunch. GasBuddy data cited by Reuters showed average retail gasoline prices in the state touched $6.16 per gallon earlier this month and could rise further as summer demand picks up.
“The more acute the alkylate supply shortfall becomes, the higher it could push prices in California,” GasBuddy analyst Patrick De Haan told Reuters.
The report added that California Governor Gavin Newsom has limited options to contain rising fuel prices, with analysts suggesting that easing the state's fuel blending requirements may be the only viable short-term solution if supply pressures persist.
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