India will surpass China to become the second largest oil demand growth centre globally in 2019 on back of buoyant auto fuel and LPG consumption, research and consultancy group Wood Mackenzie said Tuesday.
In a report, Wood Mackenzie said India’s oil demand growth recovered strongly in 2018, overcoming the aftermath of the implementation of Goods and Services Tax (GST) and demonetisation, and contributed 14 per cent of the global demand growth or 2,45,000 barrels per day.
“We forecast oil demand to grow at the same level in 2019. This will result in India becoming the second largest demand growth centre globally in 2019, behind the US but ahead of China. Transport fuels gasoline and diesel and residential LPG will continue to be the two main drivers of oil demand growth,” it said.
According to the US Energy Information Administration (EIA), India is currently ranked behind the United States and China as the world’s third-largest oil consumer. It consumed 206.2 million tonnes (over 4 million bpd) in the 2017-18 fiscal year.
More importantly, general elections in May will lead to increased travel activity for campaigning and implementation of infrastructure projects, which will bolster demand in the first half of 2019, Mackenzie said.
“Key risks ensue as crude price volatility is expected to persist. Historically, short-term gasoline demand has been relatively inelastic to retail prices in developing economies such as India. Even though higher retail prices affect consumer sentiment for new vehicle purchases, we believe this trend will continue with income effects driving the demand, subduing the price effects,” it said.