Iran-US-Israel Conflict and Global Oil and Gas Crisis - Overview
Monday, March 16, 2026
European nations depended on Russian gas.
At least to a significant extent.
This was used for heating, power generation etc.
It was transported by pipelines.
When the Ukraine-Russia conflict started in 2022, Russia limited its supplying gas to Europe. Europe was left scrambling looking for gas.
They paid heavy premiums to have gas-carrying ships routed to Europe.
These ships from as far as Asian waters arrived in a few weeks. But they remained in the waters for days, waiting to offload their cargo.
The challenge?
Europe received most of its gas from pipelines. It had only a few ports with the necessary handling plants. The ports became a bottleneck.
The next worry was losses. They were losing gas every day.
It’s all to do with handling gas. The handling of gas adds another layer of complexity in the gas supply chain.
Unlike crude oil, natural gas cannot be easily offloaded from ships. Natural gas does not work that way.
Transport of Natural Gas
Crude oil has been transported on ships for a long time. They would place it in tanks, drums, vessels of any kind.
It does not evaporate fast. It does not decompose easily. It’s easy to transport.
Natural gas on the other hand is exactly the opposite of that.
Earlier, natural gas was transported via pipelines mostly. If you lived close enough, you’d get it. It was too expensive to transport gas across the oceans.
It was only in the 1950s and 1960s that the first successful ship carrying natural gas started operations.
The solution?
Compress and cool the gas till it becomes a liquid. Then transport that liquid while trying to maintain its temperature: -162 degrees celsius.
This is why it is called LNG - Liquefied Natural Gas.
To maintain the temperature at an extreme value like that, the ships essentially needed to be thermoses.
LNG carriers are large thermoses carried on ships that attempt to keep the temperature low enough. Of course it cannot be perfect.
Over time, it loses some cool and some LNG converts to gas. If this gas builds, it can cause an explosion.
So they have to release the gas or burn it off.
This is called Boil-Off Gas (BOG).
Smart brains decided it was more efficient to use this gas to power the ship itself! Neat idea. It made things a bit more efficient.
Modern LNG carriers are also able to re-liquefy some of these gases back to the LNG form.
Still, about 0.1% to 0.25% of LNG is gasified per day. Contrast this with a crude carrier. It can just stand at one location with crude oil in its belly for months.
Importing Natural Gas
LNG carriers start worrying the moment there is a delay: Boil-Off Gas (BOG).
This is also why the sellers of LNG try to find customers close by. The farther your customers are from you, the more gas both will lose per day.
It is widely known that about 85% of crude oil is imported in India. A quick search online will show that this number is about 50% in the case of natural gas.
The fact that the import of natural gas is lower than crude oil might comfort some of us. The less comfortable part is that it is not as diversified.
Our crude oil comes from various sources: Russia ~35%, Iraq ~20%, Saudi Arabia ~13%, UAE ~8% etc.
Our natural gas comes from a much more concentrated list of sources: Qatar ~50%, USA ~8%, UAE ~8% etc.
Crude oil and LNG ships are currently stuck in the Strait of Hormuz due to the ongoing Iran conflict.
Other Traits of Natural Gas
India has about 25 days’ worth of reserve crude oil stored. It’s easy to store crude oil. As things stand today, the reserves are much less in the case of natural gas. It is much more difficult to store.
The list of products coming from natural gas is quite diverse. We get methane, propane, ethane, isobutane and a few others.
Methane is used in the form of CNG. So, it is used for transportation.
Natural gas (methane) is used for making ammonia (fertilisers), industrial hydrogen, and also burnt in power plants for generating electricity.
Industrial processes, like making steel, also depend on natural gas.
Other by-products are used for making synthetic rubber, plastics, polymers etc.
Just as in the case of crude oil, we’re a bit surprised by just how widely we depend on natural gas.
Natural gas is not just about the CNG we fill in our trucks, buses and cabs.
It can actually impact the very food we grow. Fertilisers. It can stall industrial output and growth and therefore affect our very economy.
Given how crucial a commodity this is, the government would take measures to combat the situation.
If the conflict de-escalates, we can expect immediate relief. If we sign a deal to let our gas carrying ships pass without hindrance, we can expect relief. If we can find other sources of natural gas, we can expect relief.
These are the key factors we must keep an eye on over the next few days.
What About LPG?
This is the fascinating part.
LPG or Liquefied Petroleum Gas is not only obtained from LNG or natural gas.
In fact, LPG is a by-product of crude oil! It depends on crude oil prices and availability too.
So why is it that we’re seeing LPG cylinders become unavailable?
The LPG we use to cook on our stoves comes mostly from Qatar. Almost 90% of it is from Qatar.
And Qatar being located in the Persian Gulf, is directly impacted by the Iran conflict. The Strait of Hormuz is not seeing much movement.
The situation is so critical, the Indian government has invoked the Essential Commodities Act.
So both LNG and LPG, along with crude oil from that region are unable to reach us in quantities we would like.
As of writing this, there are reports informing us that Iran has said they will let India-bound ships cross without a worry.
That’s obviously good news. Still, in a situation where so many things are happening, we must keep an eye.
Source - Groww Digest
See also this link.
