The International Energy Agency’s (IEA) new medium-term forecast
released Wednesday 12 June predicts that the world will see a sharp decline in
oil demand in the next few years, while supply is expected to increase, leading
to a surplus by 2030.
However, India along with China is expected to
drive the major oil demand in the same period because of its transport fuel
needs, which throws a cloud over the country’s energy transition trajectory.
Titled ‘Oil 2024’, the report says that production will reach 114 million
barrels per day by 2030, which is much higher than the peak demand of 106
million barrels for 2030 as forecast by the IEA. Certain countries are expected to still
increase their oil demand between 2023-2030, India and China being the main
ones, followed by emerging economies in the rest of Asia. However,
the Organisation for Economic Cooperation and Development (OECD) countries,
which includes most of Europe and the US, will continue their decade-long
decline in oil demand, says the report.
It also predicts that India and China, the major oil consumers, will
reach their peak demand and their economys’ expansion will start to slow by
2027
“This report’s projections, based on the latest data, show a major
supply surplus emerging this decade, suggesting that oil companies may want to
make sure their business strategies and plans are prepared for the changes
taking place,” said IEA Executive Director Fatih Birol in a press
release. India’s demand for oil is expected to rise by 1.3
million barrels per day between 2023 and 2030, which is the second highest
growth after that of China. While most of the demand for oil in the rest of the world and major
economies like China is going to be because of petrochemical industries,
India’s projected oil demand is expected to be driven by the transport fuel
industry. This is in stark contrast to the rest of the world, where
electrification of vehicles will lead to much lower diesel and gasoline
demands.t.
India will need more than 5,00,000 barrels per day of diesel/gasoil,
which will make up the biggest share in India’s oil demand till 2030 — 38
percent of the total. The reason for this is that the report also expects India
economic growth to be the strongest among major economies, with GDP growth
averaging 6.5 percent between 2024 and 2030. This, combined with the world’s largest population and hence a growing
consumer market, will lead to increased demand for mobility and car ownership.
The IEA expects a 40 percent increase in India’s total car fleet in the
next seven years, and also a big increase in two- and three-wheeler vehicles
that make up 75 percent of the country’s total vehicle count today. The issue
is that while two- and three-wheelers have a higher potential for
electrification and therefore less fuel consumption, the expected growth rate
for these vehicles is lower than the growth rate for passenger cars, which
incidentally have a lower potential for electrification. The net result is that
India’s need for gasoline and diesel will remain high.
On the other hand, the country is expected to see
an increase in liquified petroleum gas (LPG) demand, too, because of the
central government’s Pradhan Mantri Ujjwala Yojana, which promotes LPG as a
clean cooking fuel.