India Demanding More
India Demanding More
How current Indian demand trends inform expectations of India as the primary driver of global petroleum consumption over the coming decade.
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India is widely expected to supplant China as the world’s largest single source of petroleum demand growth over the coming decade and was already the second-largest contributor to global growth last year.
Transportation fuels like diesel and gasoline are expected to make up the bulk of Indian demand growth, bucking the trend of anticipated slowing transportation demand globally and offsetting the slowing growth seen in LPG used as a home cooking fuel.
Large longer-term forecast differences remain despite general demand growth optimism, and there’s a more than 700 kbpd gap between the IEA and OPEC Indian demand forecasts by 2030 given the latter’s ~50% faster trend growth rate assumption.
The growth in domestic diesel and gasoline consumption will manifest primarily as a reduction in Indian exports rather than the rise of fresh import demand given the current structure of India’s petroleum trade.
India is widely expected to be the one the largest drivers—if not the largest driver—of global oil demand growth between 2023 and 2030, and is broadly expected to take the crown from long-time title-holder China sometime over this decade. With an estimated population of 1.43 billion, India officially overtook China as the world’s largest country last year; however, India remains far less developed and oil consumption per capita is less than one-third that of China, let alone advanced economies.
Now, it’s become quite common to see longer-term demand outlooks that have India alone accounting for fully a third—or more(!)—of average annual demand growth in the latter half of the decade. This is not to say that Indian growth estimates have come out of nowhere: India was second only to China as a source of global demand growth in 2023, with consumption advancing ~250 kbpd or 5% on the year. India’s anticipated ascension to the top spot is also not entirely a bullish story, given that slowing growth in China is leaving pretty big shoes to fill.
Depending on your general market disposition, India’s growing importance in demand considerations is either great news (i.e., look how fast India is going to grow!) or dour news (i.e., implies much weaker growth everywhere else, especially in China). Regardless of your specific demand outlook, it’s all but guaranteed that India will play a starring—if not the starring—role. Given this centrality, it’s critical to understand what’s happening underneath the hood of Indian oil demand: what products are growing fastest and why, the debates about how fast Indian demand will grow through the end of the decade, and India’s robust petroleum trade and how it will shape how this demand growth hits the market.