India’s oil demand growth is set to overtake that of China’s by 2027, the International Energy Agency (IEA) said on Wednesday. Releasing a report on the Indian oil market outlook till 2030 during the India Energy Week, Toril Bosoni, head of markets at IEA, said India’s oil demand will reach 1.2 million barrels per day during 2023-2030. This will account for more than one-thirds of the projected global demand growth of 3.2 million barrels per day.
“India is forecast to be the single-largest source of global oil demand growth from 2023 to 2030, narrowly ahead of China. Underpinned by strong economic and demographic growth, the country is on track to post an increase in oil demand of almost 1.2 mb/d over the forecast period, accounting for more than one-third of the projected 3.2 mb/d global gains,” she said.
The country’s additional demand will be more diversely spread across product categories than in major other economies, the report said. India’s demand growth for petrochemical feedstock use will account for 18%, while globally it would in more than 90%.
“This balanced growth profile results from India’s dynamic economic development trajectory and relatively low per-capita fuel use,” as per the report. “In particular, rapid progress in the manufacturing, commerce, transport and agriculture sectors will translate into continued sharp gains in diesel use.”
The country is a net importer of crude oil and its imports are expected to rise to 5.6 million barrels per day by 2030 from the current level of 4.6 million barrels per day in 2023. “India’s oil consumption is set to increase at a faster pace than other countries, in part, because the country is still in the initial stages of economic development,” the report said.
IEA also noted that this trajectory is likely to continue with forecaster Oxford Economics seeing a 6.5% average annual GDP growth rate for the 2024-2030 outlook period. This growth will be propelled by the massive domestic consumer market, low-cost labour force and supportive demographics.
“Additionally, the government’s ambitions to improve the country’s subpar infrastructure is supporting both industrialisation and faster oil demand growth,” it said. Even as the demand for oil continues, the rising electric vehicle penetration will weigh on gasoline or petrol demand growth but has a smaller impact on diesel, said the report.
“We estimate that electrification will displace more than 200 kb/d (thousand barrels per day) of oil consumption by 2030, with about 70% coming from lower gasoline use. This exceeds the relative share of gasoline vehicles in the car fleet,” it said.
Gasoline demand growth is seen rising by a very modest 0.7% per annum from 2023 to 2030, moderated by robust growth in electric vehicles, especially two- and three-wheelers.