India’s oil demand likely to hit yet another record in 2025-26
(Source – Indian Express, Section – Economy – Page No. – 13)
| Topic: GS3 – Indian Economy |
| Context |
| ● India’s refined petroleum fuels and products consumption is forecast to reach a new peak in FY26, driven by steady energy demand across various sectors. |
Analysis of the news:
Record Petroleum Consumption in FY26
- The Petroleum Planning & Analysis Cell (PPAC) projects a 4.7% growth over FY25 estimates, with total consumption expected to reach 252.93 million tonnes, up from the revised FY25 estimate of 241.68 million tonnes.
Key Drivers of Consumption Growth
- Major Fuels: Petrol, diesel, aviation turbine fuel (ATF), liquefied petroleum gas (LPG), and petroleum coke are anticipated to lead the growth.
- Sectoral Demand: Transportation, industrial activity, aviation, and energy-intensive industries are key contributors.
- Aviation Growth: ATF demand is projected to grow nearly 10% year-on-year, mirroring the rapid expansion of India’s civil aviation sector.
- Petroleum Coke Usage: Petcoke demand is expected to rise 10% to 24.85 million tonnes, fueled by its applications in industries such as power, cement, and steel.
Historical Trends and Recovery Post-Pandemic
- India’s petroleum consumption has been on a consistent upward trajectory, barring FY21 when the COVID-19 pandemic caused a temporary decline.
- The pre-pandemic high of 214.13 million tonnes in FY20 was surpassed in FY23, with current fiscal projections reaching 241.68 million tonnes, setting the stage for FY26 to exceed all previous records.
India’s Strategic Role in Global Oil Demand
India is emerging as a major growth hub for global oil demand due to:
- Energy-intensive industries and growing vehicle sales.
- Rapidly expanding aviation and petrochemical sectors.
- Low per-capita energy consumption compared to developed nations.
India’s refining capacity, currently at 257 million tonnes per annum, is poised for further expansion, highlighting its strategic role in meeting future demand.
Challenges of Rising Import Dependency
- Despite robust growth, India’s stagnant domestic oil production necessitates increasing reliance on imports, with over 85% of crude oil sourced from abroad.
- As the world’s third-largest consumer of crude oil, this dependency presents significant economic and strategic challenges.
Global Context and India’s Edge Over China
- India is expected to lead global oil demand growth, surpassing China in growth rates by FY24, according to S&P Global Commodity Insights.
- While China, the world’s second-largest oil consumer, faces subdued demand due to structural and demographic shifts, India’s strong economic and population growth underpins its rising demand.
- The International Energy Agency predicts India will overtake China as the largest driver of global oil demand growth by 2027.
Consumption Growth by Fuel Type (FY26 Projections)
- Diesel:12 million tonnes (+2.8% YoY), reflecting robust industrial and transportation activity.
- Petrol:64 million tonnes (+6.6% YoY), driven by rising vehicle sales.
- LPG: 33 million tonnes (+4.7% YoY), indicating higher household and industrial consumption.
- ATF:95 million tonnes (+10% YoY), reflecting booming aviation activity.
- Petcoke:85 million tonnes (+10% YoY), driven by industrial applications.
Conclusion
- India’s rising petroleum consumption underscores its growing energy needs and economic expansion.
- However, balancing this growth with the challenges of import dependency, energy transition efforts, and environmental sustainability will be critical for the country’s long-term energy security and economic resilience.
| What can be Done to Reduce India’s Oil Import Dependence? |
| ● Encouraging Domestic Production: It must be kept in mind that India’s demand for oil is only going to go up as we go for 10% GDP growth and that India will continue to be an oil economy for many more years to come.
○ The only way India can reduce its dependence on imports is to increase the size of India-owned exploration and production assets overseas. That is what China has done. ● Alternate Green Sources: Another way out for India is to expand its basket and focus on green energy. With the economy gaining momentum, demand for power is on the upswing. |
| PYQ: The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of (2020)
(a) Crude oil Ans: (a) |
| Practice Question: India’s rising petroleum consumption reflects its economic growth and developmental aspirations but poses significant challenges in terms of energy security and sustainability. Critically analyze the drivers, implications, and strategies needed to address the country’s growing dependency on petroleum imports. (250 Words /15 marks) |
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