India to outpace China in oil demand growth by 2027: IEA

  • As domestic consumption boosts demand for capital goods, India's energy-intensive manufacturing sector is expected to expand, further enhancing the country's position as a crucial industrial centre

Rituraj Baruah
First Published7 Feb 2024
India is forecast to be the single largest source of global oil demand growth from 2023 to 2030,. Photo: AFP<br />
India is forecast to be the single largest source of global oil demand growth from 2023 to 2030,. Photo: AFP(AFP)

New Delhi: India is set to become the leading driver of global oil demand, surpassing China by 2027, according to a report by the International Energy Agency.

"India's oil demand will grow at a rapid pace by 2030 despite accelerated green energy moves. Growth in India will surpass that of China in 2027," said Keisuke Sadamori, director of energy markets and security at IEA.

In its recently released report 'India Oil Market Outlook to 2023,' IEA said India will see a surge of 1.2 million barrels per day in its oil demand between 2023 and 2030, representing over a third of the expected global demand increase.

"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," IEA said in its report 'India Oil Market Outlook to 2023' report released on Wednesday.

India currently consumes 19 million barrels of oil per day.

The report said that India’s additional demand will be more diverse across product categories than in other major economies. Only 18% of the country’s demand growth will be for petrochemical feedstock use while globally it would be more than 90%, and in China, virtually all net gains will be for chemical production.

"This balanced growth profile results from India’s dynamic economic development trajectory and relatively low per-capita fuel use. In particular, rapid progress in the manufacturing, commerce, transport and agriculture sectors will translate into continued sharp gains in diesel use," the report said.

The report forecasts significant demand growth for aviation turbine fuel, naphtha, and diesel up to 2030, with jet fuel demand expected to grow by 6.9%, and naphtha and diesel by 5.9% and 4.5%, respectively.

IEA said India is on track to register the fastest expansion among major economies in 2024 for the third straight year. Oxford Economics expects a 6.5% average annual GDP growth rate for 2024-2030, propelled by the massive domestic consumer market, low-cost labour force and favourable demographics.

"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," IEA said.

As domestic consumption boosts demand for capital goods, India's energy-intensive manufacturing sector is expected to expand, further enhancing the country's position as a crucial industrial centre, and attracting international companies diversifying their supply chains from China.

"Additionally, the government’s ambitions to improve the country’s subpar infrastructure is supporting both industrialisation and faster oil demand growth," it said.

While transportation demand is expected to grow, the increase in vehicle electrification is likely to have a more significant effect on curbing gasoline demand growth compared to diesel. The report forecasts a modest annual increase of 0.7% in gasoline demand from 2023 to 2030, due to the rise in electric vehicles use, especially two- and three-wheelers, increased biofuel uptake, and better fleet efficiency.

"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," IEA said.

 

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