There is a shift on the horizon for oil demand, with India poised to eclipse China as the biggest driver of global growth, and potentially the last, as the world shifts to a more green
A growing population, which has probably already surpassed that of China, will help underpin this growth along with consumption trends. India’s transition from traditional petrol and diesel transport is expected to lag other regions, while electric vehicle adoption in China is soaring.
While India is unlikely to replicate the mammoth scale of China’s sprawling oil network (the nation’s daily crude consumption is three times that of its neighbor), traders and producers seeking to tap the decline in global demand growth will bet on the South Asian nation over the next decade. .
“India was always going to overtake China in a matter of time in terms of being the driver of global demand growth, mainly due to demographic factors such as population growth,” said Parsley Ong, head of energy and chemicals research in Asia from JPMorgan Chase & Co. in Hong Kong.
China’s economic awakening at the turn of the century transformed the nation into a major consumer of commodities, from crude oil to metals and grains, giving a boost to resource-rich countries around the world. For oil, the end of boom times is coming, with major refiner China National Petroleum Corp. which recently pointed to a peak in Chinese oil consumption around 2030.
The change in demand growth leader looks even closer.
China’s “Last Hurrah”.
Industry veteran Ed Morse, the head of commodities research at Citigroup Inc., says China’s rebound after years of Covid restrictions will likely be the nation’s “last hurrah” for the demand Viktor Katona, chief crude oil analyst at data intelligence firm Kpler, estimates that India’s growth will overtake China’s from 2026. He also expects India’s oil demand to reach peak much later in 2036.
“China’s role as a growth engine for global oil demand is fading fast,” said Emma Richards, senior analyst at Fitch Solutions Ltd. to London. Over the next decade, China’s share of total emerging market oil demand growth will drop to 15% from nearly 50%, while India’s share will double to 24%.
India is already playing a more prominent role in the oil market after the invasion of Ukraine more than a year ago. The South Asian nation has become a big consumer of Russian crude, turning the OPEC+ producer’s oil into fuels that are often shipped to other regions such as Europe and the US.
It is not the first time that India has been talked about as the new growth center for oil demand, with similar predictions made in the middle of the last decade. Should it materialize this time, the transition to the top spot will likely be far from smooth and bogged down by red tape.
State refiners have been slow to modernize their operations and rigidly follow the old and cumbersome process of issuing tenders for the spot purchase of oil, rather than adopting a more nimble and flexible approach of negotiating and signing agreements directly with the counterparties.
Still, India’s fast-growing crude appetite will position the South Asian nation as an attractive opportunity for foreign traders and producers in the long term, said Vandana Hari, founder of Vanda Insights in Singapore.
EV Boom
India has big ambitions to transition its industries, including transport, to greener energy options, but the nation lags behind other major nations, meaning its dependence on fossil fuels is likely to last much longer .
In contrast, the adoption of electric vehicles in China has been rapid, an ominous sign of long-term demand for gasoline in the world’s largest auto market. Electric vehicle sales in China almost doubled to 6.1 million units by 2022, compared with 48,000 vehicles in India, according to BloombergNEF. Electric vehicles are already displacing more than 1.4 million barrels per day of oil use globally, BNEF said.
