India's strong economy, population, and demographics are expected to significantly impact global oil markets over the next decade, making it the largest source of global oil demand growth between now and 2030, despite initial slowdowns in developed economies and China, according to IEA Indian Oil Market report.
The IEA predicts a peak in global oil demand this decade, with demand growth diverging across sectors, with road transport fuels set to decline first due to the rise of electric vehicles, efficiency improvements, and biofuels.
The global energy crisis has emphasized energy security as a political priority, particularly for India, which heavily relies on oil imports for supply.
Urbanisation, industrialization, a wealthier middle-class, and efforts to improve access to clean cooking will underpin the expansion in oil demand.
India is on track to post an increase of almost 1.2 mb/d, accounting for more than one-third of the projected 3.2 mb/d global gains, reaching 6.6 mb/d by 2030.
Diesel/gasoil is the primary source of oil demand growth in India, accounting for nearly half of the country's increase and over one-sixth of global oil demand growth until 2030.
Jet-kerosene demand is expected to grow at 5.9 per cent per year, while gasoline will grow by 0.7 per cent due to electrification.
LPG demand is also expected to grow due to petrochemical industry investments in production facilities. The Indian government's clean cooking programs have led to a three-fold increase in LPG imports in the past decade, with further initiatives expected to continue demand growth.
Indian oil companies are investing heavily in the refining sector to meet rising domestic oil demand. Over the next seven years, 1 mb/d of new refinery distillation capacity will be added, more than any other country outside of China.
According to IEA, India is set to maintain its position as a key exporter of transportation fuels to Asia and the Atlantic Basin, with continued investment in refining capacity and complexity boosting light and middle distillate production.
Further, India's role as a global swing supplier has risen since 2022, as the loss of Russian product exports to European markets has increased the pull of Asian diesel and jet fuel westward.
New refining capacity is forecast to boost product supplies to global markets to 1.4 mb/d through the mid-decade before edging lower to 1.2 mb/d by 2030 due to the steady rise in domestic demand.
India's domestic production accounted for just 13 per cent of the country's supply needs in 2023, and domestic crude oil production is expected to see continued declines over the medium term.
However, India's energy transition is expected to lead to significant oil savings in the forecast period, with increased electric vehicle usage playing a crucial role in decarbonising the transport sector. The combination of new EVs and energy efficiency improvements is estimated to avoid 480 kb/d of extra oil demand in 2023-2030.
Also, India is expected to significantly contribute to its decarbonisation of the transport sector, as it is the world's third-largest ethanol producer and consumer. With abundant feedstocks, political support, and effective policy implementation, India has achieved an ethanol blending rate of around 12 per cent.
The country has also advanced its deadline for doubling nationwide ethanol blending to 20 per cent in Q4 2026, despite challenges such as rapidly expanding feedstock supplies.
India's economic growth has raised concerns about its energy supply security. As the world's second-largest crude oil net importer in 2023, India has increased crude oil imports by 36 per cent over the past decade. This could increase to 5.8 mb/d by 2030, affecting India's supply security.
The energy crisis and surge in long-haul crude sources, particularly from Russia, have boosted India's oil resilience.
Current stock holding levels equate to 66 days of net-import cover, with SPR stocks of 26 mb equaling seven days.
The report suggest that India needs to strengthen its SPR programs and improve oil industry readiness to respond to potential supply disruptions.
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