India Leads Oil Demand
Diesel demand is leading the charge, accounting for nearly half of India's demand growth.
The U.S. Energy Information Administration says India is set to overtake China as the leading driver of oil demand growth in Asia, marking a significant shift in the region's energy landscape. This changing of the guard in oil consumption reflects India's booming economy and growing appetite for fuel, while China's demand growth slows amid economic headwinds and a push towards electric vehicles.
India's robust oil demand growth, expected to hit 6 million barrels per day by 2025 or 2026, is attracting global suppliers and could lead to increased investments in the energy sector, potentially boosting related stocks.
Surge in Diesel Demand
India's diesel demand is climbing steadily, fueled by a mix of economic activity and seasonal factors. In December 2024, diesel consumption rose to 8,048 thousand metric tonnes (TMT), marking a 5.85% year-on-year increase from 7,603 TMT the previous year. This growth reflects heightened travel during the holiday season and a boost in agricultural operations, which heavily rely on diesel-powered equipment. Trucks and commercial passenger vehicles, the backbone of India's logistics and transportation sectors, also contributed significantly to this uptick.
Despite this resurgence, diesel demand faced headwinds earlier in the year due to heavy monsoon rains and slower economic growth. The September quarter saw GDP growth dip to a seven-quarter low of 5.4%, dampening fuel consumption temporarily. However, as the festive season kicked in and rural activities picked up pace, diesel regained momentum, underscoring its critical role in powering both urban and rural India.
China's EV Boom Impacting Oil
China's electric vehicle (EV) revolution is like a giant vacuum cleaner, sucking up the country's thirst for oil. In 2024, EVs zoomed past traditional gas-guzzlers, accounting for more than half of new car sales in China. This electric surge is putting the brakes on China's oil consumption, which has been the engine of global oil demand growth for years. The impact is already visible:
- China's oil imports dipped by 2% in 2024, the first annual decline in two decades (excluding the pandemic year).
- Gasoline demand in China fell by about 1% in 2024 and is expected to slide even faster this year.
- By 2030, China's EV fleet could displace up to 6 million barrels of oil per day globally.
- The International Energy Agency expects China's oil demand to start shrinking by the 2030s.
This shift is like watching a giant oil tanker slowly change course. While China's appetite for oil isn't disappearing overnight, its days of voracious growth are waning. The country that once gobbled up more than half of the world's oil demand growth is now leading the charge towards a future where the hum of electric motors replaces the roar of gas engines.
India's thirst for oil is outpacing even the most optimistic projections, making energy analysts wonder if they should have paid more attention in their high school economics classes.
