India to be biggest driver of global oil demand by 2027, will eclipse China

According to the Paris-based International Energy Agency (IEA), India’s crude oil demand growth is predicted to surpass China’s by 2027, making the former the primary driver of global oil demand growth. This prediction was made on Tuesday, February 7.

Based on IEA forecasts, India’s oil demand is expected to rise by around 1.2 million barrels per day (bpd) by 2023, which would account for almost one-third of the estimated 3.2 million bpd growth in world demand by the end of this decade.

According to IEA forecasts, India’s total oil demand will be 6.64 million bpd in 2030 compared to 5.48 million bpd in 2023. Since the nation’s domestic oil consumption is now below, the demand predictions appear to take both domestic demand and fuel exports into account.

“The massive industrial expansion (in India) means that diesel/gasoil is the single largest source of oil demand growth, accounting for almost half of the rise in the nation’s demand and more than one-sixth of total global oil demand growth through to 2030. Jet-kerosene demand is poised to grow strongly, at around 5.9% per year on average, but from a low base compared to other countries,” the agency said in its report ‘Indian Oil Market Outlook to 2030’.

“India’s petrol demand is projected to grow by 0.7% on average, as the electrification of India’s vehicle fleet avoids a more substantial rise. LPG (liquefied petroleum gas) rounds out the growth picture, as petrochemical industry investments in production facilities boost feedstock demand,” the report added.

By 2030, it is anticipated that rising energy efficiency, the use of biofuels, and the penetration of electric vehicles (EVs) will save an additional 500,000 barrels of oil demand. This indicates that, in the absence of these variables, India’s estimated growth in oil demand by 2030 would have been about 1.7 million bpd. 200,000 bpd of the anticipated displacement of oil demand resulting from these reasons is anticipated to come from EV penetration alone.

India’s crude oil imports are predicted to increase by more than a fourth to 5.8 million bpd by 2030 due to robust oil demand growth, which is primarily driven by the growth of diesel consumption and persists in the near to medium term despite the growing adoption of electric vehicles and biofuels, according to the agency.

“As a relatively small oil producer, and with limited potential for near-term growth, India’s domestic production accounted for just 13 per cent of the country’s supply needs. In 2023, domestic oil production averaged around 700 kb/d (700,000 bpd). Despite renewed efforts by the government to attract foreign upstream investment, domestic crude oil production is expected to see continued declines over the medium term. A dearth of new discoveries in recent years will contribute to Indian oil supply falling to 540 kb/d (540,000 bpd) by 2030,” the report said.

In light of the tightening global climate and declining local supply, the IEA states that there is increased need to “maintain the country’s oil resilience in case of market disruptions.” The current levels of oil stock holdings, with seven days’ worth of strategic petroleum reserve (SPR) stocks, correspond to 66 days of net import cover, according to the agency’s approach. The stockpiles of IEA member nations cover 90 days’ worth of demand.

India is classified as an associate member of the organization rather than a full member.

Strategic petroleum reserves lessen the disruption to energy supplies caused by calamities like wars.

Presently, three locations in India hold a 5.33 million tonne strategic crude oil reserve capacity. Under the second phase of the nation’s strategic petroleum reserves program, more strategic reserves will be constructed, with a total capacity to hold 6.5 million tonnes of crude oil.