India’s Oil Demand Surge: A Game-Changer in Global Energy Markets
New Delhi [India], December 29: India’s remarkable growth in oil demand has captured global attention as 2024 ends, setting the stage for continued expansion in the coming year. Surpassing China in growth rate, India is solidifying its position as a key player in global fuel consumption, according to S&P Global Commodity Insights.
The country’s increasing appetite for fuel has prompted refiners to fast-track expansion plans and diversify crude oil sourcing. With its peak demand scenario projected to arrive much later than China’s, India has become a focal point for international oil players. Analysts from S&P Global Commodity Insights highlight India’s vital role in shaping the future of oil demand in the region.
“India is poised to lead the region’s oil demand growth, alongside Southeast Asia and other South Asian nations,” said Kang Wu, Global Head of Macro and Oil Demand Research at S&P Global Commodity Insights. Forecasts indicate that India’s oil demand will rise by 3.2 percent in 2025, far outpacing China’s projected growth rate of 1.7 percent.
India’s Strong Performance in 2024
In 2024, India’s oil demand demonstrated impressive growth. From January to October, consumption increased by 180,000 barrels per day, reflecting a 3.2 percent year-over-year rise. In contrast, China’s demand grew by 148,000 barrels per day, or 0.9 percent year-over-year. These figures underscore India’s growing importance in the global oil market and the likelihood of significant refining capacity expansion in 2025.
Efforts to Diversify Crude Oil Imports
As India’s refining capacity expands, policymakers and refiners are making concerted efforts to diversify the country’s crude oil import portfolio. This strategic move aims to mitigate dependency on a limited number of suppliers. Recent diplomatic engagements are expected to open new avenues for crude imports from regions like Africa and Latin America. However, actual growth in volumes will hinge on broader market conditions.
“Diplomatic efforts are paving the way for increased crude imports from Africa and Latin America, although market dynamics will ultimately determine the scale of growth,” explained Abhishek Ranjan, South Asia Oil Research Lead at S&P Global Commodity Insights.
India already sources crude oil and gas from a variety of regions, including the Middle East, Africa, Europe, North America, South America, and Southeast Asia. Such diversification is crucial for a nation that relies on imports for over 80 percent of its crude oil needs.
Policy Reforms to Strengthen Domestic Production
The Indian government has introduced several initiatives to boost domestic oil production and reduce import dependence. A key reform includes expanding the scope of exploration policies to encompass resources like shale oil, shale gas, and coal bed methane, alongside traditional petroleum and natural gas. These measures aim to attract private and foreign investments into the upstream energy sector.
Moreover, the abolition of the windfall tax on domestically produced crude oil has made India’s upstream energy landscape more appealing to investors. In a landmark move, the Rajya Sabha recently amended the Oil Fields (Regulation and Development) Act of 1948 to facilitate innovation and broaden exploration activities.
India’s series of upstream reforms, including granting greater marketing freedom to producers, is setting the stage for sustained growth in the energy sector. As the country continues to emerge as a global leader in oil demand, these strategic efforts will play a crucial role in ensuring energy security and economic growth in the years ahead.
