NEW DELHI: India’s oil demand will double to more than 9 million barrels a day, marking largest absolute consumption growth for any country, and its dependence on imports will rise to 90% by 2040, according to the International Energy Agency’s latest World Energy Outlook.
This means the Indian economy will continue to depend in the near term on oil or fossil fuels in spite of the government’s stress on renewable energy and electric vehicles. This does not augur well as the suggested price trends in business as usual or stated policy environment scenarios do not offer much comfort on the price front in spite of subdued demand growth from other economies and rising exports from new players such as the US and Brazil.
Oil is one of the key elements of the government’s fiscal math. Costlier fuel cramps government’s fiscal room for social spending or stimulus as it disturbs macro-economic parameters by raising costs for consumers, farmers, transporters and manufacturers.
The report says a third of the growth in India’s oil will come from trucks. Another quarter will come from passenger cars, with the Indian car fleet growing by a factor of seven between now and 2040. Use of oil as a petrochemical feedstock will contribute the remaining 15% demand.
On the global stage, the Outlook sees the oil trade becoming increasingly centred on Asia, with China soon overtaking the European Union as the world’s largest oil importer and holding that position to 2040, despite the flattening of its oil demand in the 2030s. But this also poses a challenge as the growing concentration of trade flows to Asia increases the amount of oil passing through major global chokepoints, with implications for global oil security.
The Outlook also sees the influence of traditional players on the oil market waning, with the US output pushing down the share of OPEC countries and Russia in total oil production. This share drops to 47% in 2030, from 55% in the mid-2000s, implying that efforts to manage conditions in the oil market could face strong headwinds. Pressures on the hydrocarbon revenues of some of the world’s major producers also underline the importance of their efforts to diversify their economies.