Fuel fears with Iran war

2026-03-09 - 09:04

The Iran War that started from 28th February 2026 with USA and Israel launching bombing raids on Iran has led to a sharp increase in global oil and gas prices. The reaction in Bhutan was predictable as there were long lines outside fuel stations, LPG outlets and people even carried jerry cans to take home fuel from fuel pumps. The LPG gas ran out in several major outlets and they had to restock. The Department of Trade (DoT) on 5th March 2026 issued a public advisory saying there is no need to panic as there is enough fuel and gas in Bhutan, no indication of supply disruption from principal suppliers, not to store fuel in containers as it is not safe and there is an MoU with India that assures fuel supply. The Department said it has strategic reserves of 15,000 LGP cylinders, 1,417,000 liters of petrol and 1,499,000 liters of diesel stored in western and eastern Bhutan. While the DoT issued the advisory it is certain that there will be a massive increase in fuel prices in the weeks to come with the next price revision due on the evening of 14th March. Fuel prices in Bhutan are only revised at the beginning and middle of each month. The DoT has already told the 69 fuel retail outlets to buy as much fuel as possible and keep their tanks full or near full. Since the war, DoT is also in touch the four PSU fuel suppliers to Bhutan from India and they have assured supply. The government has also formed a coordination committee to keep a close eye on the situation. A DoT official said that even during the Ukraine war when prices went up the suppliers in India continued to supply Bhutan with no disruption. A positive development is that the USA has allowed India to import Russian oil for a month without the threat of sanctions. This will be expected to give some relief in India. However, at the same time all is not well on the oil and gas front. The Indian government announced it has 25 days of crude oil, and 50 days of stock. However, the main challenge could be the LPG gas for which India has only 30 days of stock and most of it came from the Gulf. If the situation does not improve a gas shortage is anticipated in India. Oil which was USD 70 per barrel on 25th February sharply rose to USD 116.58 as of 9th March morning as Iran blocked the Strait of Hormuz through which 20% of global oil flows and attacked oil facilities in the Gulf. However, with news that G7 countries (7 most developed economies) are considering a joint release of oil from reserves, potentially as much as 400 million barrels, oil prices went back below USD 108 per barrel on the news. Qatar the world’s largest supplier of Liquid Natural Gas shut down production after an attack. Kuwait also shut production and Iraq is also on the verge of shutting down production in a major oil field. The main issue is that fuel is stuck at the Strait of Hormuz. The Qatari Energy Minister warned that if the Strait continues to be blocked than fuel could reach USD 150 a barrel and impact the global economy. Another issue is that the blockade can also impact the supply of global fertilizers which also come from the Gulf mainly and can also impact Bhutan. While Bhutan will get fuel the price will go up sharply and there may be an LPG Gas shortage. High fuel prices will also mean that prices of all commodities will also go up due to higher global transportation costs. Many countries in the region are already carrying out rationing like Bangladesh, Pakistan and Myanmar while big fuel refiners like China and Singapore are curtailing exports.