India set to overtake Japan as world’s third biggest oil consumer
India’s growing middle class will soon make it the third-biggest oil consumer, reshaping the global energy map as China consumes less and the United States produces more.
India will overtake Japan this quarter, International Energy Agency 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 petrol use by 19 per cent in April alone from a year earlier. The IMF predicts the economy will swell by 7.5 per cent this year as the 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, the chief oil analyst at London-based consultants Energy Aspects. “The demand growth is unbelievable.”
The country’s unbridled thirst for oil has bolstered crude prices as they start to recover from a six-year low. It is a further jolt to the energy market after the US 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 million barrels of oil a day this quarter, compared with Japanese demand of 3.8 million bpd. The US and China are the world’s top oil users.
“India will be a big centre of oil and gas demand growth in the next few years,” the IEA executive director Maria van der Hoeven said in Vienna, where she was attending an Opec conference.
Japan’s consumption will drop further as nuclear power stations are restarted, replacing oil-fired plants, she said. Oil has rebounded to about $63 a barrel from $45 a barrel in January. A price of $65 would be “equitable”, the Indian oil minister Dharmendra Pradhan said on Wednesday in Vienna, where Opec is meeting to discuss production limits. India imports about 85 per cent of its oil, with the majority coming from Opec countries. In April, the country’s oil use rose by about 300,000 barrels per day, similar to the growth rate 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 barrels per day 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, the chief executive of the Mumbai-based refiner Essar Oil. “Even with oil prices rising, demand is continuing to increase here and will keep growing.”
Passenger vehicle sales rose about 16 per cent in April, according to the Society of Indian Automobile Manufacturers. It expects vehicle sales to grow as much as 8 per cent this financial year.
“Cars are cheap and finance is available,” said Anand Dorairajan, a 32-year-old human-resources executive at a shipping company 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, Mr 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 started a 300,000-bpd refinery on India’s east coast in April and plans to add capacity at a plant in Gujarat in western India. Bharat Petroleum intends to expand its refinery in central India, and Chennai Petroleum will boost capacity in the south.
In all, processing capacity will rise more than 30 per cent to about 6.2 million bpd by the end of the decade, according to the oil ministry targets.
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Updated: June 4, 2015 04:00 AM