Amid intense efforts to reduce oil import bills and incentivise alternative technologies such as the battery, flex fuel and hydrogen, India – the world’s fifth-largest economy is expected to be the largest contributor to global oil demand in the second half of this decade, with significant growth in demand for transport fuels.
The International Energy Agency (IEA) sees India among the largest drivers of global oil demand by the end of the decade, defying the global demand trend for transport fuels with significant growth. India’s oil demand is expected to grow more than any other country, except China, between 2023 and 2030.
“Emerging economies in Asia, particularly China and India, account for all of the global demand growth. By contrast, oil demand in advanced economies falls sharply,” according to the latest report released by IEA. Growth in the demand for diesel and gasoline in India is set to be far more than in any other country.
The country’s oil demand reflects its fast-expanding economy with benign demographics, a burgeoning middle class, and accelerating urbanisation and industrialization.
India is currently the fifth-largest economy in the world and the fastest-growing one. It is the world’s third-largest consumer of crude oil, which is refined into fuels like diesel and gasoline, and imports more than 85 percent of its crude oil requirements.
Oil demand in India remains robust, driven particularly by the transportation sector’s reliance on gasoline and diesel. “In India, transport fuels will defy the global trend and increase significantly. Indian demand is expected to rise by 1.3 mb/d, with growth almost equal to that of its northern neighbor,” as per the report.
Buoyant transport fuel demand comes on the back of vehicle growth on Indian roads. India has surpassed Japan to become the third-largest passenger vehicle market in the world. The agency noted that there has been an eightfold increase in the number of cars on Indian roads between 2000 and 2023, and holds potential for further growth.
Source: IEA
The government has instituted various schemes and programs to promote the use of vehicles powered by battery and hydrogen as well as the mandatory blending of ethanol and compressed biogas in fuel to reduce the dependence on the import of crude oil.
Electric vehicle penetration in India is still in the single digits, but the adoption is growing faster in the two and three-wheeler segments. As per the Vahan portal, a total of around 1.6 million electric vehicles were sold in India during 2023-24, which includes 944,126 two-wheelers, 632,485 three-wheelers, 90,432 four-wheelers and 3,693 buses.
Though two and three-wheelers account for about 75 percent of the total vehicle count in India, these segments could act as a slight drag on gasoline demand as they have high potential for electrification. IEA’s outlook factors in a 40 percent growth in the size of the car fleet by 2030.
“Road diesel, the most used product in India and closely linked to industry and commerce, will account for 520 kb/d of 2023-2030 growth (38% of the total). Similarly, gasoline will register a rise of 270 kb/d (20% of the total) as car ownership becomes more widespread. This is far more than in any other country in our projections,” the report said.
IEA projects global oil demand to rise by 3.2 million barrels per day (mb/d) between 2023 and 2030 to 105.4 mb/d on the back of increased use of jet fuel and feedstocks from the petrochemical sector. An increase in the use of electric vehicles, emerging clean energy technologies and more expansive efficiency policies are together expected to result in a much slower growth trajectory for oil demand, plateauing towards the end of the forecast period.
Source: IEA
India’s oil demand is seen growing by 1.34 mb/d to 6.75 mb/day during the period while the demand in China is pegged to increase by 1.42 mb/day to 18.06 mb/day.
“In the second half of this decade, India will become by far the most important contributor to overall growth. Gains of 900 kb/d between 2025 and 2030 will be well ahead of China’s 570 kb/d and three-quarters of net global gains over the final five years of our forecast,” the agency said.