There is widespread speculation that India could soon overtake China in terms of its oil demand to become the biggest consumer in the world. As China’s investment in renewable energy, metals and minerals and electric transportation begins to pay off, the Asian giant may soon no longer be the biggest importer of crude in the world. Meanwhile, India’s growing population and slow transition to green means that it will likely take this position within the next five years.
As China’s demand for oil eventually begins to wane, India could well become the biggest consumer of oil in the coming years. India’s population has already surpassed that of China, suggesting its energy demand will also increase significantly. While India has ambitious plans to develop a large renewable energy industry, its traditional gasoline and diesel-fuelled transport is expected to remain long after many other countries make the switch to electric. This is in contrast to China, which is expected to shift to electric much sooner, as its EV market is already taking off.
India’s oil demand is unlikely to ever be as high as China's at its peak, but it could become the biggest importer of oil due to its massive population and slower progress towards a green transition. The China National Petroleum Corp. recently forecast a peak in China’s oil consumption by around 2030. Parsley Ong, the head of Asia energy and chemicals research at JPMorgan Chase & Co. in Hong Kong explained, “India was always going to exceed China in a matter of time in terms of being the global demand growth driver, mainly due to demographic factors like population growth.”
Viktor Katona, the lead crude analyst at data intelligence firm Kpler, expects India to overtake China in terms of oil demand in 2026, while he thinks India’s crude demand could peak around 2036. This sentiment has been echoed by multiple industry experts. This is largely based on recent shifts in industrial and energy activities in the two countries.
China has gradually been transitioning to renewable alternatives, increasing the proportion of its electricity generation coming from green sources each year. China’s electricity generation has been steadily increasing over the last two decades, reaching 7,600 TWh in 2020 from 1,280 TWh in 2000. By 2020, non-fossil fuels, including hydroelectric, wind, and solar generation, increased to 27 percent of China’s generation mix, from 17 percent in 2000. Solar power has been China’s fastest-growing generation source, growing by an average of 43 percent each year between 2015 and 2020 and accounting for 6 percent of the country’s electricity generation in 2020. This reflects China’s aim of achieving net-zero carbon emissions by 2060.
Meanwhile, India’s oil imports have risen substantially over the last year, as the government has taken advantage of the discounted price of Russian oil. Following the Russian invasion of Ukraine last year, and the subsequent sanctions on Russian energy products, certain countries have used this as an opportunity to purchase low-priced crude from Russia. As India has a strong refining industry, much of the crude imported from Russia ends up as fuels that are shipped to other regions of the world, including the U.S. and Europe, despite them both having imposed sanctions on Russian oil. India is also stockpiling this crude while it is available, at a much lower price than the alternatives.
Shiqing Xia, an oil and chemicals consultant at Wood Mackenzie, believes “China’s oil demand peaks by 2027 and thereafter [will turn] to a long-term decline as the country actively pursues energy transition … and as the general economic growth slows down in the longer term.” However, “Outside of China, overall oil demand in India and other emerging economies in Southeast Asia [will] continue to grow through the early 2040s,” she explained. “For the next two decades, Asia’s growth engine will be India and Southeast Asia,” Xia added.
While many agree with this assessment, some energy experts expect China to continue playing a major role in the global oil market for several more years. Yaw Yan Chong, the director of LSEG Oil Research in Asia, stated “China has a net-zero carbon emission goal by 2060, which is by when I expect its crude demand to ease as it gradually heads towards that.” Similarly, Bob McNally, the president of the Rapidan Energy Group, suggested: “Short of major gas discoveries or technology breakthroughs in renewable or alternative energy, we do not expect China’s demand growth for oil coming to an end for at least another two to three decades, though the rate of demand growth may slow.”
As India’s population surpasses that of China and China continues to accelerate the development of its clean energy capacity, many energy experts expect India to soon overtake the Asian giant to become the world’s biggest importer of crude. This is supported by several factors, from India’s strong refining industry to the rapid uptake of EVs in China. However, not everyone agrees, with some suggesting the shift could be much slower than many are now suggesting.
By Felicity Bradstock for Oilprice.com
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