Why in News?

  • The International Energy Agency (IEA), in its latest report "Oil 2025" released on June 17, 2025, projected that India, currently the world's 3rd-largest oil consumer and importer, will lead global oil demand growth by a significant margin.
  • India is expected to add 1 million barrels per day (bpd) to global demand by 2030, driven by its stellar economic expansion.

GLOBAL OIL DEMAND OUTLOOK (IEA ‘OIL 2025’ REPORT)

  • Global Demand Growth: Expected to grow by 2.5 million bpd by 2030.
  • Plateauing Demand: Global oil demand is forecast to reach a plateau near 105.5 million bpd by 2030.
  • Supply Outlook: The world is expected to remain well-supplied through the end of the decade, barring major disruptions.
  • Risks to Outlook: Rising geopolitical risks in the Middle East and unresolved trade tensions could cast a shadow over the projections.
  • EV Impact: Electric vehicles are projected to displace 5.4 million bpd of oil demand globally by 2030. Electric car sales reached a record 17 million in 2024 and are expected to surpass 20 million in 2025.

INDIA’S POSITION AS DRIVER OF GLOBAL OIL DEMAND GROWTH

  • Leading Growth: India will contribute a steep 1 million bpd to global oil demand growth by 2030, more than any other country.
  • Current Demand: Forecast to rise from 5.64 million bpd in 2024 to 6.66 million bpd in 2030.
  • Economic Driver: This growth is primarily fueled by India's "stellar GDP expansion," projected at an average annual rate of 2.8% over the forecast period.
  • Fastest Growing Major Economy: India will remain the world's fastest-growing major economy in 2025 for a fourth year running.
  • Economic Size: Projected to overtake Japan as the world's fourth-largest economy in 2025.
  • Import Dependence: India meets over 95% of its oil needs through imports, as domestic production is declining.

KEY DRIVERS OF INDIA’S OIL DEMAND GROWTH

  • Transport Fuels (A Global Anomaly):
    • Unlike other regions where EV adoption is curbing transport fuel demand, India's transport fuels will lead the gains.
    • Jet Fuel/Kerosene: Expected to rise fastest, at almost 6% annually. Benefits from population growth (5% between 2025-2030) and a rapidly expanding middle class keen on travel.
    • Gasoline (Petrol): Annual demand growth of 4%, with significant scope for expansion due to low levels of car ownership. Projections assume a 40% increase in the car fleet by 2030.
    • EV Impact: The expansion rate of the car fleet comfortably outstrips the impact of efficiencies and EVs, with EV growth mainly in two- and three-wheelers.
  • Industrial-Linked Products:
    • Demand will marginally lag transport fuels, with annual increases in:
      • Gasoil (Diesel): 3.3% annually, contributing an aggregate gain of 380,000 bpd over the forecast period. Buoyed by urbanization, industrialization, and infrastructure development. Diesel currently accounts for one-third of India's total oil use.
      • Naphtha: 2.0% annually, driven by expansion in petrochemical feedstocks and new projects.
      • LPG/Ethane: 2.5%
  • Clean Cooking Initiatives:
    • Widespread adoption of clean cooking methods (LPG) acts as an additional boost to LPG demand.
    • Pradhan Mantri Ujjwala Yojana (PMUY): Government subsidy programs like PMUY (launched 2016 to provide LPG connections to rural households) have been instrumental in this respect, replacing traditional cooking methods.

RISKS TO OIL DEMAND

  • Debt-Fueled Consumption: The IEA cautions that India's consumption boom, particularly for transport fuels, is "to a large extent debt-fueled."
  • Rising Household Debt: Household debt rose to 43% of GDP in 2024, up from 35% in 2022.
  • Credit Spiral: A possible credit spiral could derail the projected expansion, posing a risk to the outlook.

GLOBAL & INDIAN REFINING & PRODUCTION CAPABILITIES

  • Global Production Capacity: Forecast to rise by more than 5 million bpd to 114.7 million bpd by 2030.
  • Indian Crude Oil Production: Expected to decline marginally by 30,000 bpd to 670,000 bpd by 2030.
  • Refining Capacity by 2030:
    • China: Largest refiner at 19.5 million bpd (with nearly 2.2 million bpd excess capacity).
    • United States: 17.7 million bpd.
    • Russia: 7.1 million bpd.
    • India: 6.8 million bpd.