Six weeks into a war started by the United States and Israel that has violently disrupted global energy markets, India is experiencing a curious economic phenomenon: supply shortages, notably of gas, accompanied by virtually no serious price impact for everyday consumers.

Politicians might view this as a triumph of state management, but the economic reality is far more punishing.

While the government has selectively raised prices on higher-octane petrol, jet fuel, and commercial gas cylinders, the broader consumer market for oil and gas remains heavily shielded.

The standard 14.2 kg cooking gas cylinders for domestic use saw a modest hike of Rs 60 in the first week of March and have been frozen ever since.

Commercial 19 kg cylinders have seen two hikes — Rs 115 on March 1 and Rs 195 last week — but by all analyst accounts, prices everywhere, particularly petrol and diesel remain suppressed.

With crude oil firmly above $100 a barrel — and likely to stay there for the foreseeable future as the US and Israel get set for a full ground war with Iran — the Indian government is trapped in a difficult bind.

Because when you try and fight the laws of supply and demand by capping prices, the inevitable result is shortages.

And those shortages are already hitting the most vulnerable.

A Crisis of Access

Echoing the dark days of the Covid-19 pandemic, several migrant workers in major cities are packing up and returning to their villages.

They are not going because fuel is too expensive but because they simply cannot find it.

Recent reporting by The Indian Express, which interviewed over a 100 migrant laborers at Mumbai’s bustling railway stations, paints a grim picture.

Close to half of the workers — primarily bound for Uttar Pradesh, Bihar, and West Bengal — cited the LPG crisis as their reason for leaving. Incidentally, most of these labourers have never been able to access the standard 14.2 kg cylinders because they lack the KYC documents required for a registered connection.

Another problem for another day.

Instead, they rely on the popular "chotu" 5 kg cylinders, which require only a valid ID.

On Sunday, the government issued a briefing note reiterating that these 5 kg cylinders are widely available at local distributorships.

Quite likely the reality on the ground is different mostly thanks to a cornering and diversion of these cylinders into the black market, mostly for lucrative commercial use.

Hundreds of thousands of homes and businesses have meanwhile switched to kerosene, firewood, or electricity.

Demand and supply are beginning to adjust, but not through calibrated public policy. Instead, the price signals are being dictated by the black market rather than the open market.

Because official prices are suppressed, the natural disincentives to cut back on consumption or shift to alternate fuels simply do not exist.

This is a precarious situation for a highly aspirational developing economy.

The Price of Reality

India’s upward mobility translates directly into energy consumption — more two-wheelers, more air conditioners, more refrigerators, and more travel.

But it is quite clear now these aspirations must be calibrated to this new geopolitical reality, even if not of our making.

Even if the US and Israel halt their bombing campaigns, or Iran ceases responding by firing missiles across the Persian Gulf, normalcy is far away. And the world has fundamentally changed.

Countries like India which import close to 90% of their crude have little choice but to lower the energy footprint.

And one effective tool for demand destruction and resource allocation is price.

Moreover, if India wants citizens to tighten their belts, it might complement these price hikes with consistent public service messaging and visible austerity at the top.

For instance, the reduction of the several dozen-car ministerial convoys to maybe two or three cars is one such example, not for the fuel it saves but for the message it could convey.

Adjusting to this new energy normal will be tough.

The good news is that demand moderation and supply matching are already underway on the margins, driven by extensive solar investments, electric vehicle purchases and most recently, a government-backed shift to induction stoves.

But these transitions require time.

In the interim, India must stop hiding the true cost of global energy from its citizens.

Hiking prices is the only way to signal a willingness to adapt. Indians must prepare to pay the real price of a changed world.