Without curbs India's oil demand seen hitting 500 mtpa by 2040
25 September 2018
India will have to rein in its crude oil demand, which is forecast to grow to 500 million tonnes per year (mtpa) by 2040 unless ways are found to check rising demand. This would mean a rise of around 10 million barrels per day (bpd), up from about 4.7 million bpd in 2017.
But the persistent increase in oil prices, which is expected to cross $100 a barrel mark soon, should act as a dampner in the demand growth, reports quoting sources at Indian Oil Corporation, the country’s biggest oil refiner and fuel retailer, said on Monday.
India’s oil demand growth of 5.9 million bpd will make up for about 24 per cent of the global oil demand growth of 15.8 million bpd, Partha Ghosh, an executive director at Indian Oil Corp, said during the Asia Pacific Petroleum Conference (Appec) in Singapore on Tuesday.
India imports more than 80 per cent of its oil needs. The country imported 4.4 million barrels per day (bpd) oil in August, costing about $12 billion, according to government data.
A spike in demand to 10 bpd could push up India’s oil import bill to about $27 billion (at current prices) a month and to about $34 billion a month at $100 per barrel.
This could add up to an annual oil import bill of $324 billion to $408 billion, which is more than the county’s annual import bill.
India’s refining capacity would also increase to about 439 million tonnes per year by the financial year of 2030 as new and existing refineries continue enhancing their infrastructure, while domestic demand is forecast to increase to 356 million tonnes per year over the same period, Ghosh said.
The country’s strong economic growth and the demographic advantage of having a pool of young people will remain key drivers in energy demand growth.
The rate of oil demand growth, however, will tend toward a slower pace by 2024 to 2025.
“While alternatives and energy efficiency is expected to reduce oil demand, the biggest dampening factor will come from sustained increase in oil prices,” Ghosh said.
“India’s economy is very sensitive to oil prices. It’s said that a $10 per barrel increase reduces India’s GDP by 0.2 to 0.3 per cent.”
And, with oil expected to hit $100 a barrel mark soon, Indian refiners, at least in the private sector will cut back on imports unless cheaper imports are available, say industry sources.
Benchmark Brent crude oil futures surged 2 per cent on Monday to over $80 a barrel as markets tightened ahead of the start of sanctions by the United States on Iran.
The soaring oil prices are further hammering the Indian rupee that has fallen to historic lows. A combination of rising oil prices and falling rupee value may also force the government to curb oil imports.