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India’s Diesel Demand Struggles To Recover

Diesel demand in India, which has been the key driver of the country’s economic growth in recent years, is struggling to catch up with gasoline in terms of fuels recovering from the pandemic-inflicted crisis.

The lower industrial and economic activity this year has curbed demand for diesel more than demand for gasoline, industry executives and analysts told Bloomberg.

Diesel consumption in India is still twice as much as gasoline, but the weaker economy during the national lockdown and the local lockdowns afterward, as well as the monsoon season, have created challenges for diesel demand’s recovery to pre-pandemic levels. Higher taxes that have raised diesel prices have also contributed to the lower demand.

On the other hand, people prefer to commute in their own vehicles now, underpinning a strong recovery in gasoline demand.

“Personal mobility over public transport has supported gasoline, but diesel is getting knocked-out across the sectors,” Senthil Kumaran, head of south Asia oil at industry consultant FGE, told Bloomberg.

Total fuel demand in India increased in September for the first time since June, according to government data reported by Reuters. Gasoline sales increased by 3.3 percent year over year, and by 2.9 percent compared to August.

However, diesel sales—accounting for around 40 percent of all of India’s fuel sales—were still down by 6 percent in September compared to the same month last year, although they jumped by 13.2 percent compared to August, the data showed.  

The struggling recovery of diesel consumption has had Indian refiners seeking to adjust to the low diesel demand while maximizing—where possible—production of gasoline.

The drop in diesel demand amid lower refinery runs has resulted in some refiners importing gasoline to meet demand because most refiners have for years optimized production to make more diesel, executives at refineries told Bloomberg at the end of last month.  

By Charles Kennedy for Oilprice.com

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