New Delhi, March 16 -- Given the distinction that India makes between essential and discretionary spending, the Centre's use of the Essential Commodities Act to regulate LPG supply was no surprise. Households being prioritized over commercial users was like a policy reflex; restaurant food is seen as an indulgence.

Yet, market psychology doesn't always comply. The very visibility of LPG-starved eatery closures may have amplified the sense of scarcity that set off a rush for LPG cylinders, worsening the panic.

While price-capped gas ran short, the black market showed price elasticity-with rising rates shrinking demand. Globally, meanwhile, relatively inelastic demand for crude oil poses a huge risk. The greater the inelasticity, the high...