One theme gets the top slot when India’s energy security is discussed—the need to substitute oil with natural gas. From that follows the quest for politically risky projects such as the one to pipe gas from Iran to India. But is gas really a safer bet than oil?
Over the past year, Russia has often threatened to shut off gas supplies to its neighbours, in a bid to show who is the regional boss. These episodes are proof that the politics of gas is no better than the politics of oil.
It has also been argued that, unlike oil, gas prices are more market-driven. That defence too may not hold for long. Russia has now proposed a gas cartel, modelled on Opec. Others in this price-fixing consortium will be Qatar, Iran, Venezuela and Algeria. It is too early to figure out whether this is just a threat, or whether a gas cartel will emerge soon. The point is: a cartel will raise gas prices relative to oil, and could destroy many comfortable policy and business assumptions in India.