PAYNE INSTITUTE COMMENTARY SERIES: COMMENTARY

By Morgan Bazilian

July 27, 2026

When the United States and Israel struck Iran on February 28, 2026, one the conflict’s largest impact in some developing economies was gas for cooking. Within three weeks the propane Argus Far East Index jumped 53 percent, and the cif Amsterdam Rotterdam Antwerp large cargo benchmark rose 64 percent to $922.75 a tonne. The Strait of Hormuz typically carries roughly 30 percent of the world’s seaborne LPG exports, some 44.2 million tonnes a year. For households in Lagos, Jakarta, Karachi and rural India, that shock came within weeks as either a price spike or in physical availability. After more than a decade of clean cooking policy with some good results, things are sliding backwards.

For clarity, LPG is a retail label for a mix of two hydrocarbon gases, propane and butane, compressed into liquid form for storage in a cylinder or tank. The mix varies by climate and market. Propane, with a lower boiling point, dominates in colder regions and in the US, where futures trade out of Mont Belvieu, Texas. In Asia, the reference is different: Saudi Aramco sets separate monthly official prices for propane and butane, known as the Contract Price or CP, and that is the number Indian, Pakistani and Indonesian importers actually price their term contracts against. The wholesale market does not trade a product called LPG, it trades propane and butane separately, and the cylinder on a stove in Delhi, Jakarta or Lagos is simply that same commodity, blended and bottled.

Why LPG moved more than oil

LPG proved more fragile than some other refined products. On March 2, Iranian drones struck Saudi Aramco’s Ras Tanura refinery, the kingdom’s largest at 550,000 barrels a day, prompting a precautionary shutdown and a suspension of propane and butane exports for several weeks while Aramco rerouted some cargoes through the Red Sea to bypass the strait entirely. Regional refiners, facing a natural gas price surge of their own, began burning butane internally as fuel rather than exporting it, tightening supply further. The Saudi CP, which had been running near $542 a tonne for propane in February, jumped roughly 10 percent to about $595 a tonne within days of the strikes and had climbed to $750 a tonne by May, a level Aramco held flat that month. Asia Pacific buyers who normally source from the Gulf bid instead for European cargoes and for US barrels, pulling prompt supply away from Northwest Europe even as US terminal fees climbed to their highest level in more than a decade. Of the LPG that transits the strait, India and China alone accounted for 20.7 million and 16.2 million tonnes in 2025, so both countries felt the interruption almost immediately once fighting began. Mont Belvieu propane, which had traded near 63 cents a gallon before the war, settled around 79 cents by mid-June, a 25 percent war premium that outpaced crude’s own gain over the same stretch.

How the shock traveled through different supply chains

India was the biggest hit economy. The country imports about 60 percent of its LPG, and the government has said most of that arrives via the Strait of Hormuz, landing across a network of 22 LPG import terminals on both coasts. On March 8 the government ordered state refiners to divert propane, butane, propylene and butene streams that would otherwise feed petrochemical plants into the household LPG pool, lifting domestic production by roughly 25 to 28 percent within days. That still left a gap: weekly Middle East inflows fell to just 34 percent of India’s total LPG imports by mid-March, the lowest share since January, pushing Indian oil marketing companies to lean on alternative regional cargoes and to draw on a cushion negotiated months earlier: a one year contract signed in November 2025, three months before the war, for 2.2 million tonnes of US Gulf Coast LPG, roughly four very large gas carriers a month, supplied by Chevron, Phillips 66 and TotalEnergies, about 10 percent of India’s annual imports and the first structured US contract of its kind.

Retail cylinder prices rose twice, by 60 rupees on March 7 and another 29 rupees on June 7, pushing the unsubsidized Delhi price to 942 rupees for a 14.2-kilogram cylinder. State fuel retailers absorbed the rest of the gap: their under recovery on LPG jumped from 41,338 crore rupees in 2024-25 to roughly 60,000 crore in 2025-26, and the government’s own budgeted LPG subsidy for FY2026-27, set at 11,000 crore rupees, is now expected to run well over that figure as international prices stay elevated. Facing that fiscal strain, the government restructured the Pradhan Mantri Ujjwala Yojana, cutting the annual quota of subsidized refills from nine cylinders a year to four for its close to 100 million low income beneficiaries, a reduction opposition leader Mallikarjun Kharge called a retreat from the scheme’s original 2016 promise of twelve. Even with the cut, Ujjwala households still pay only about two thirds of the market rate.

Indonesia’s exposure is also significant. Domestic production covers only about 1.6 to 1.7 million tonnes of roughly 8.6 to 10 million tonnes in annual demand, and import dependency climbed from about 81 percent in 2025 to nearly 84 percent by February 2026, with the United States, not the Gulf, the dominant supplier. Jakarta’s own strategic buffer stood at only about a 10 day supply as of early April. More than 70 million households cook on the subsidized three kilogram melon cylinder, and Pertamina held that subsidized retail price fixed near 12,750 rupiah throughout the war even as its underlying cost rose, so the widening gap fell entirely on a state budget that already carried roughly 87 trillion rupiah in LPG subsidies in 2025, covering 92 percent of national consumption by volume. Unsubsidized 12-kilogram cylinders were not protected the same way: Pertamina raised that price 18.75 percent in April, from 192,000 to 228,000 rupiah. Jakarta’s countermeasures included cutting the LPG import duty to zero and exploring Russian LPG cargoes alongside Russian crude, a hedge against a single supply region that would have been unthinkable before the war.

Nigeria is one of the few large LPG markets that mostly supplies itself. The Dangote refinery and NLNG’s gas processing plants pushed domestic coverage of household demand from about 79 percent in 2024 to roughly 88 percent in 2025, before easing back toward 86 percent in the first half of 2026, and imports had shrunk to a small share of total supply. Still, producers kept exporting a meaningful share of output as LPG and propane, even as domestic supply ran behind the benchmark households needed, and as global LPG benchmarks climbed during the war, exporting grew more lucrative relative to selling at home, widening the gap further. By June, Nigeria’s LPG imports had spiked 1,400 percent in a single month, from 0.1 to 1.5 kilotonnes a day, even as domestic supply itself fell 10 percent. Retail prices reflected that squeeze: cooking gas that sold below 1,000 naira a kilogram before the war reached 1,500 to 2,400 naira by June, prompting the national LPG marketers association to warn publicly that continued increases could spark public outrage against retailers, and authorities convened an emergency stakeholders meeting in Abuja in late June to try to stabilize supply, with only partial success.

Pakistan’s exposure is the most direct of any big importer, because Iran itself is a primary supplier rather than a country the fighting merely happened near. More than 60 percent of Pakistan’s LPG arrived overland from Iran before the war, trucked across the countries’ shared border rather than shipped through the strait, which meant the supply was disrupted by the fighting itself and by Iran’s own wartime priorities, not by shipping insurance or a chokepoint offshore. In Islamabad, 11.67-kilogram cylinders sold for 3,900 to 5,100 rupees in April, gas supply in Karachi was rationed to six hours a day, and the government cut public offices to a four-day week amid widespread protests.

Much of sub-Saharan Africa was not directly exposed to Gulf supply, since the region sources less than 5 percent of its LPG from the Mideast Gulf and around 80 percent from the United States, but importers still felt the shock secondhand, through a global benchmark price and through competition with Asian and European buyers for the same US cargoes. By July, IEA Executive Director Fatih Birol was telling reporters that 3.4 billion people worldwide, most of them in Africa, had been negatively affected by the LPG crisis, while the agency’s own Africa analysts warned that rising costs were already weakening sustained LPG use and increasing the risk of reversion to traditional fuels.

In Nairobi’s Kibera settlement, families who had switched to LPG stoves are back to charcoal, cooking over open fires because, as one resident told the Associated Press, they do not have many other options. Nigerian households in Ilorin report the same switch, citing charcoal’s relative affordability despite its own rising cost. The health stakes are well established: the World Health Organization attributes roughly 2.9 million premature deaths a year worldwide to household air pollution from solid fuels, with women and children bearing the greatest exposure, and the IEA puts the toll in Africa alone at 850,000 deaths annually. Wildlife conservationists in Kenya add that renewed reliance on firewood accelerates deforestation and pushes fuel gathering deeper into wildlife habitat, undoing a secondary benefit of the clean cooking transition that gets less attention than the health case.

A fragile clean cooking campaign

The crisis landed in the middle of an active international campaign to expand clean cooking access, one that had already been struggling to keep pace with its own targets before the war began. At a Paris summit in May 2024, governments and companies pledged $2.2 billion to move Africa away from charcoal and firewood by 2030, against an IEA estimate that reaching universal access on that timeline would take $4 billion a year in capital investment. By July 2025, still before the war, the IEA’s own progress report concluded that the 2030 goal was already out of reach and reset the target to 2040, at a lower but still substantial $37 billion in cumulative investment. Sub-Saharan Africa was nonetheless on pace for its fastest ever annual gain in clean cooking access in 2025, with 15 million people gaining access, about 35 percent above the prior five-year average, built substantially on LPG distribution infrastructure.

Of the $2.2 billion pledged in Paris, $740 million had been deployed across 22 African countries by mid 2026, and nearly half of that disbursed total went directly to LPG programs, against just under 20 percent for biomass alternatives and about 8 percent each for electric cooking and biogas, Argus reported. The co-chairs of the still-postponed second Summit on Clean Cooking in Africa, Kenya, Norway, the United States and the IEA, still convened a virtual status meeting in July 2026, in the middle of the crisis, and announced $900 million in fresh commitments on top of the original pledge, alongside 121 new clean cooking policies adopted across more than 30 countries.

India and Indonesia have both begun looking toward structural diversification. New Delhi is weighing device subsidies for induction cooktops modeled on its electric vehicle incentive scheme, alongside faster biogas plant commissioning, while Jakarta examined compressed natural gas and coal based dimethyl ether as substitutes for imported LPG. IEEFA’s analysis found DME carries a subsidy burden roughly 2.3 times that of LPG itself.

The ongoing war and associated instability does not bode well for efforts on clean cooking, at least in the short to medium term. It has manifested as a chokepoint problem for India, a raw import dependency problem for Indonesia, an enforcement problem for Nigeria, and a direct wartime supply cut for Pakistan. Like many other products from oil, diesel, jet fuel, LNG, and industrial chemicals and gases, the LPG landscape will likely change dramatically as a result of the war.

ABOUT THE AUTHOR

Morgan Bazilian
Director, Payne Institute and Professor of Public Policy, Colorado School of Mines

Morgan Bazilian is the Director of the Payne Institute and a Professor of public policy at the Colorado School of Mines. Previously, he wD.as lead energy specialist at the World Bank. He has over two decades of experience in the energy sector and is regarded as a leading expert in international affairs, policy and investment. He is a Member of the Council on Foreign Relations.

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