The demand for transportation fuel in India is projected to increase by 6%-8% in fiscal year 2026, according to a Reuters report.
Industry executives and analysts say this growth is because of a rise in vehicle sales.
Meanwhile, in Asia, the consumption growth is expected to lag behind the supply growth due to new refinery expansions in the region, according to the report.
India’s fuel demand is expected to increase over the next decade, positioning the country to surpass China as the primary driver of global oil demand growth this year.
The Organization of the Petroleum Exporting Countries has projected that India will account for most of the demand growth in crude oil in the coming years.
India’s gasoline demand
Gasoline demand is projected to increase by about 6-7% in the upcoming fiscal year, while diesel demand is expected to rise by about 4%, as per A S Sahney, the chairman of Indian Oil.
He also noted that consumption remains strong in the country.
The government’s proposal to slash personal income tax rates in its annual budget has sparked optimism and anticipation of a significant boost in consumer spending within the world’s fifth-largest economy.
This potential surge in consumption could lead to increased demand across various sectors, notably the automobile industry, as more individuals may find themselves with greater disposable income and, consequently, the financial capacity to purchase cars.
The move is seen as a strategic attempt by the government to stimulate economic growth by encouraging spending and investment.
Gasoline demand is expected to grow by 7-8%, while diesel demand is expected to grow by 4%, according to Mundkur Shyamprasad Kamath, managing director of Mangalore Refinery and Petrochemicals Limited.
Additionally, energy consultancy FGE expects India’s gasoline consumption is expected to rise by roughly 40,000 barrels per day to 950,000 bpd in 2025.
Meanwhile, diesel demand is projected to remain stable.
Profit margins may remain subdued
FGE also predicts that Asia’s overall supply will increase by approximately 150,000-160,000 barrels per day on a year-on-year basis in 2025.
The demand is also expected to rise by about 100,000 barrels per day in 2025 due to new refineries and expansions in China, India, Indonesia, and Thailand.
Despite the anticipated increase in Indian oil demand, profit margins are projected to remain low.
Analysts predict that the price difference compared with Dubai crude will reach its highest point in the second quarter of 2025 in Asia, potentially reaching $10-$11 per barrel.
However, this price difference is expected to decrease in the final two quarters of the year due to seasonal factors.
India, a major greenhouse gas emitter, plans to increase its biofuel blending initiative by raising the ethanol proportion in gasoline to 20% by 2025-26.
This move aims to reduce India’s carbon footprint and promote environmental sustainability, while also supporting the agricultural sector.
However, challenges such as feedstock supply, infrastructure, fuel quality, and food security need to be addressed.
Overall, India’s push for increased ethanol blending is a significant step towards a cleaner energy future.
Sanjay Khanna, director of refineries at Bharat Petroleum was quoted as saying in the report:
With the developments around ethanol-blending in gasoline, our prediction is, motor spirit (demand) is likely to grow in the range of 2-3%, and diesel (demand) is expected to grow in the range of 4-6%, in the year to 2026.
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