India set to surpass China in need for oil as growth paths diverge

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NEW DELHI As the world transitions to a more sustainable future, India is expected to overtake China as the most significant driver of global growth. This will result in a change in the demand for oil.
Together with purchasing patterns, an expanding population that has probably already surpassed China’s will support this rise. While China is rapidly adopting electric vehicles, India is anticipated to lag other regions in its transition away from conventional gasoline and diesel-fueled transportation.
India’s daily crude consumption is three times greater than that of China, so it is unlikely that it will ever match the size of its neighbor’s vast oil network, but traders and producers hoping to capitalise on slowing global demand growth will bet on the South Asian country for the foreseeable future.
According to Peter Ong, head of Asia energy and chemicals research at JPMorgan Chase & Co. in Hong Kong, “India was always going to surpass China in a matter of time in terms of being the global demand growth engine, mostly owing to demographic considerations like population increase.”

As a result of China’s economic reforms around the turn of the century, the country became a major consumer of raw materials, metals, and grains, which boosted the economies of resource-rich nations all over the world. According to top refiner China National Petroleum Corp., Chinese oil consumption will peak around 2030, signalling the end of the boom times for the commodity.
The shift in the leader of demand growth now seems imminent.

‘Final Hurrah’ for China

Head of commodities research at Citigroup Inc. and industry veteran Ed Morse predicts that China’s recovery from years of COvid limitations will likely be the country’s “final hurrah” for demand. Lead crude analyst Viktor Katona of data analytics company Kpler predicts that starting in 2026, India’s growth would outpace that of China. He believes that the peak in Indian oil demand will occur much later, in 2036.
According to senior analyst Emma Richards of London’s Fitch Solutions Ltd., “China’s significance as a global oil demand growth engine is waning fast.” According to her, China’s share of the total growth in emerging market oil demand will fall to 15% over the course of the next ten years from almost 50%, while India’s share will double to 24%.

After the invasion of Ukraine more than a year ago, India is already playing a bigger role on the oil market. The country of South Asia has grown to be a big user of Russian crude, converting the OPEC+ producer’s oil into fuels that are frequently transported to other regions, such Europe and the US.
While China stagnates, Indian oil demand is expected to increase. According to Citi, the peak in Chinese oil demand may occur in the middle of the decade.

Similar predictions were made in the middle of the previous decade, and it is not the first time that India has been mentioned as the new hub of the growth in oil demand. If it happens this time, the transition to the top job will probably be far from easy and clogged with red tape.

State-run refiners have been slow to modernise their processes and continue to rigidly adhere to the antiquated and time-consuming practise of issuing tenders for the purchase of oil on the spot rather than adopting a more flexible and agile strategy of directly negotiating and concluding agreements with counterparties.

Yet, over the long term, according to Vandana Hari, the founder of Singapore’s Vanda Insights, India’s rapidly expanding thirst for crude would make the South Asian country an alluring opportunity for foreign traders and producers.

I.V. Boom

Although India is lagging behind other large countries, it has high hopes to transfer its industries, notably the transportation sector, to cleaner energy sources. As a result, the country’s reliance on fossil fuels is expected to last much longer.

In contrast, China has adopted electric vehicles quickly, which is a worrying sign for the long-term demand for gasoline in the largest auto market in the world. In comparison to India, which sold 48,000 EVs within the same time span, EV sales in China nearly doubled to 6.1 million units in 2022, according to BloombergNEF.