Demand has been pegged at 214.5 million tons in the year starting on April 1, according to predictions by the Indian oil ministry’s Petroleum Planning and Analysis Cell. If achieved, that would be an all-time high and an increase of 5.5% from a revised estimate for 2021-22.
Local sales of gasoline, diesel and other fuels have started picking up after being whipsawed by several virus waves and tax-inflated pump prices in the past two years. However, the nation is yet to recoup the losses caused by the pandemic that had decapitated consumption by as much as 70% at one stage following the world’s strictest lockdown in 2020.
Any rise in consumption in India, the third-biggest crude oil buyer that relies on the global market for about 85% of its requirements, would raise the country’s import bill at a time when the South Asian nation is facing one of the deepest budget deficits among major economies.
The government may focus on converting more sugar and grains into biofuel to reduce its dependence on overseas supplies and cut bulging sugar stockpiles.
The timing is not in India’s favor. Oil prices hovered near their highest level in seven years after Russian President Vladimir Putin signed an order to send what he called “peacekeeping forces” to the two breakaway areas of Ukraine that he officially recognized on Monday.
The world’s largest independent oil trader Vitol Group expects oil prices to be above $100 for a “prolonged period” over the next six to nine months. That would inevitably increase pump prices in India.
High oil prices pose a challenge to India’s demand recovery. When crude oil traded around $100 a barrel in 2013-14, the country’s annual consumption growth of petroleum products slumped below 1%. Consumption has been lower than initial projections by the oil ministry’s agency during the past three years.