The EIA recently published a global oil consumption data sheet that provided a clear picture of where the global oil economy is currently heading. The data revealed that although there had been a substantial oil consumption increase in the Middle East (led by Saudi Arabia), Asia (Led by China) and Oceania, the rest of the world which included Russia, other FSU countries, the U.S., Japan and Europe experienced a consistent decline in their oil consumption rates over the last decade.
This global consumption data along with current global supply glut suggests that the overall oil consumption rate might remain weak even in 2016. But even while oil demand slows in much of the world, there is one nation that continues to exceed expectations for oil consumption rates.
India’s oil consumption is rising at a quick pace
For the very first time, India’s economic growth rate (of around 7.3% for year ending March 2015) is set to overtake China. The International Monetary Fund (IMF) predicted in its World Economic Outlook report, that India is going to be ‘world’s fastest growing large economy’. “Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices,” the IMF said in its report. It needs to be noted that crude oil does not have any major substitute in India at the moment. Related: Why The East African Oil Bonanza Remains A Dream… For Now
The market for electric vehicles (EV’s) is almost non-existent in India. With sustained growth in the number of IC (internal combustion) engine vehicles, the consumption of both gasoline and diesel (which constitute almost 73 percent of the total sales of petroleum products in India) has witnessed a sharp increase in this decade. According to the Petroleum Planning and Analysis Cell (PPAC) and ET Intelligence group, gasoline sales increased by 14.77 percent (highest growth in a decade) in 2015 while diesel sales increased by 5.64 percent during the same period.
While global demand for diesel is likely to remained subdued, a consistent growth in diesel consumption rate in India indicates that its economic growth is indeed picking up pace. In fact, India’s rising middle class could be a game changer for the Asian nation. From the current 22 percent, India’s middle class could grow to almost 45 percent of the country’s total population by the year 2030. Related: Saudi Cash Crisis Intensifies As Interbank Rates Soar
India currently has just 40 cars for its 1000 people, so what happens when a country of more than 1.2 billion people start getting cheaper fuel , cheaper cars and earns a higher income? As many more people begin to hit the roads, India’s oil consumption is taking off. With a sustained economic growth, the oil consumption rate is set to climb even further in the years to come.
With a consumption rate of around 10.5 million barrels a day, China’s thirst for oil is almost three times higher than India’s. However, the Japanese financial think-tank Nomura believes that China’s oil production has peaked and that the country’s economic slowdown would most likely result in flattening oil consumption growth this year. The Indian economy on the other hand is expected to grow rapidly for the foreseeable future, and low oil prices come at an opportune time. As a major importer of crude oil, low prices are helping India cut its import bill (India imports close to 80% of its total crude oil). India’s imports are likely to fall by 35 percent to around U.S. $73 billion this year.
In addition, the country’s downstream sector is doing exceedingly well and its refining capacity is only behind U.S, Russia and China. These indicators coupled with Indian Prime Minister Modi’s ongoing efforts to attract more foreign investments make India a more promising energy market than ever before.
By Gaurav Agnihotri of Oilprice.com
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