India’s oil addiction to vault nation into top three global guzzlers
LONDON (Bloomberg) -- India’s growing middle class will soon make it the third-biggest oil consumer, reshaping the global energy map as China uses less and the U.S. produces more.
India will overtake Japan this quarter, International Energy Agency (IEA) estimates show. The country’s galloping demand growth may eventually surpass China’s, a shift that was unforeseen just a few years ago.
As living standards improve, the number of Indians buying cars and trucks has risen, boosting gasoline use by 19% in April alone from a year earlier. The International Monetary Fund predicts the economy will swell by 7.5% this year as Prime Minister Narendra Modi makes business reforms, beating Chinese growth for the first time in a quarter-century.
India “reminds me of China a decade ago,” said Amrita Sen, chief oil analyst at London-based consultants Energy Aspects. “The demand growth is unbelievable.”
The country’s unbridled thirst for oil has helped bolster crude prices as they start to recover from a six-year low. It’s a further jolt to the energy market after the U.S. shale revolution pushed Russia out of the top spot for natural gas production and paved the way for the first American exports.
The IEA estimates India will consume about 4.1 MMbopd day this quarter, compared with Japanese demand of 3.8 MMbod. The U.S. and China are the world’s top oil users.
Price Recovery
Oil has rebounded to about $60/bbl from $45/bbl in January. A price of $65 would be “equitable,” Indian Oil Minister Dharmendra Pradhan said Wednesday in Vienna, where the Organization of Petroleum Exporting Countries is meeting to discuss production limits. India imports about 85% of its oil, with the majority coming from OPEC countries.
In April, the country’s oil use rose by about 300,000 bopd, similar to the growth rate seen in January and February. If that pace is maintained for the rest of the year, India may overtake China, whose annual growth is estimated at 295,000 bopd by the IEA.
“India is growing: We have a new government, a new confidence in the economy, people are driving more,” said Lalit Kumar Gupta, chief executive officer of Mumbai-based refiner Essar Oil Ltd. “Even with oil prices rising, demand is continuing to increase here and will keep growing.”
Car Sales
Passenger-vehicle sales rose about 16 percent in April, according to the Society of Indian Automobile Manufacturers. It expects vehicle sales to grow as much as 8 percent this financial year.
“Cars are cheap and finance is available,” said Anand Dorairajan, a 32-year-old human-resources executive at a shipping firm in Mumbai. He bought a Hyundai car eight months ago to add to the Suzuki his family already owned, paying about $11,300. “When young people start working, they want to buy a vehicle with their first salaries. That’s what I did.”
As part of his ambitions for economic growth, Prime Minister Modi has proposed an end to government controls on fuel pricing, putting more money in the hands of state-run refiners. He has called on them to expand to meet demand as he works to shift the economy more toward manufacturing from services.
Indian Oil Corp. started a 300 Mbopd refinery on India’s east coast in April and plans to add capacity at a plant in Gujarat in western India. Bharat Petroleum Corp. intends to expand its refinery in central India and Chennai Petroleum Corp. will boost capacity in the south.
In all, processing capacity will rise more than 30% to about 6.2 MMbod by the end of the decade, according to Oil Ministry targets.
The jump in energy consumption is reminiscent of the early days of China’s demand boom. That country’s growth in gross domestic product soared toward 10% in the first half of the 2000s, pushing oil use beyond Japanese demand in 2003. China’s economy will grow by an estimated 6.8% this year, according to the IMF.
