Petroleum demand in the world’s third-largest oil consumer has been growing faster than anywhere else in 2022. It is rising by more than 400,000 barrels a day. That’s equivalent to more than 20% of the total global increase. Let’s learn more about why India is a bright spot for world oil demand.
The country’s vigorous appetite for oil was clear early in the year. However, what’s impressive is that it has remained robust in recent months. Take note that this is just as consumption growth is slowing elsewhere.
Three factors help to explain that resilience. First, a fast-growing economy: India is set to post the second-strongest expansion among the Group of 20 this year. It is behind only oil-rich Saudi Arabia and well ahead of China. Second, New Delhi has capped retail fuel prices, insulating the public from the impact of $100-plus oil on the wholesale market. And third, the government has turned to Russia for petroleum, benefiting from the discounts offered by Moscow — at times as much as $20 a barrel — to keep its oil sales flowing.
If current trends continue, India’s consumption will average at least 5.2 million barrels a day in 2022. This is surpassing the previous annual record which was set in 2019 before the onset of the pandemic at 5 million barrels a day. To put that into context, current demand tops that of Germany, France, and the UK combined. And there’s no peak in sight.
Although Indian oil-use growth will slow next year, it’s likely to remain steep by historical standards at 200,000 barrels a day, with the country consuming an average of 5.4 million barrels a day. But there are risks. Current momentum suggests demand will remain healthy, the outlook is by China’s economic slowdown and interest-rate hikes by India’s central bank in an effort to shore up the rupee.