India imports almost all of its oil, shipping in around 4.2mn barrels per day (bpd) of crude in 2017, according to trade flow data in Thomson Reuters Eikon. “Gasoline demand rose 7.4%, or 41,000 barrels per day, down from 12% growth in 2016 as demand was affected by demonetisation at the start of the year,” the bank said. India in late 2016 pulled all 500- and 1,000-rupee notes out of circulation, crimping retail and wholesale markets.
A driver reads a newspaper as he sits on a spare tyre attached to a parked oil tanker at a truck terminal in Mumbai. India imports almost all of its oil, shipping in around 4.2mn bpd of crude in 2017, according to sources.
“The demonetisation exercise hit consumption, particularly in the first half of 2017. We are likely to see better growth this year,” said Sukrit Vijayakar, director at Indian energy consultancy Trifecta.
India also saw some structural demand changes that affected the use of refined oil products. A government push for household to use more liquefied petroleum gas (LPG) has India challenging China as the world’s top LPG importer. This has come at the cost of a straight 15-month decline in jet fuel and kerosene demand in India, Morgan Stanley said.
Also, “naphtha demand… was down 8% for 2017 as a whole, possibly driven by more LPG use in petrochemicals,” it said. For 2018, energy consultancy FGE expects India’s oil demand growth to improve to 4.3%. “India’s fuel demand will rebound in 2018 because of policy initiatives by the government and the country’s economic expansion,” said Senthil Kumaran, senior oil analyst at FGE. “Higher purchasing power of consumers along with rapid growth in rural infrastructure will drive two-wheeler and passenger car sales,” he said. India’s slow oil demand growth has surprised many, given the country has often been touted as the next China in terms of rising oil consumption.
Yet the oil demand figures correlate with slow, albeit improving, growth in a related field: car sales. India’s new passenger car sales in 2017 broke through 3mn for the first time, reaching 3.23mn cars, according to the Society for Indian Automobile Manufacturers said yesterday. That means India broke a previous record of 2.8mn in annual new sales from 2012. The figure, though, remains far below China’s new car sales of almost 3mn a month. The low auto sales are partly explained by India’s annual per capita gross domestic product (GDP) being merely a fifth of China’s.
Fuels at Indian petrol stations are also much more expensive. If an Indian citizen with an average salary buys 10 gallons of gasoline per month, that would represent nearly 30% of the person’s income, while the average Chinese would fork out just 5%, data from statistics company Numbeo showed. However, India’s lacklustre auto sales may pick-up as its economy continues to grow strongly, at over 6% per year. Trifecta’s Vijayakar said car and motorbike sales in India “have shown good growth in the last few months…(and) should be better this year.”
Sources and photo-credits: Reuters, Gulf Times