Increasing expenditure by the current government on infrastructure in an attempt to hold off rivals in the upcoming elections in 2019 may lead to an increase in diesel consumption within the country.
India is the third largest oil user globally. The increasing diesel consumption by the country solidifies India’s role as a driver of oil demand globally.
Growing concerns about a slip in crude oil demand in 2019 due to the slowdown in economic growth have been put to rest with India’s growing fuel prices. In fact, analysts believe that India’s surging diesel consumption can help stabilize fuel and oil prices.
India’s diesel demand has been forecasted to rise by 5.7 percent by analysts at the Fitch Solutions and by 6.4 percent by the consultants at Wood Mackenzie in 2019. According to the data released by the Ministry of Petroleum, India consumed 6.9 million tons of diesel each month in 2018. This comes to around 1.7 million barrels per day.
According to Sanjiv Singh, the Chairman of Indian Oil Corp, India is a diesel driven economy. He also said that there is a high demand for energy in different sectors, which will continue rising in 2019. With GDP more than seven percent and plenty of urbanization going on, it is no surprise that diesel demand continues to grow.
Peter Lee, a senior analyst at Fitch Solutions, forecast a major growth in vehicle sales due to India’s positive demographics, loose monetary policy, and low vehicle penetration. The increase in vehicle sales will ultimately lead to an increase in fuel demands.
As per the data collected by the International organization of Motor Vehicle Manufacturers in 2015, India held twenty-two cars per thousand people versus 821 cars per thousand people in the U.S.
The upcoming elections in April and May will add to the growing diesel demand with election rallies and deployment of polling officers right around the corner.
The government has allocated 190 billion rupees in improving infrastructure like roads, which will lead to a surge in diesel consumption.
According to Aman Verma, a senior research analyst at Wood Mackenzie, the increased activity as a result of upcoming elections will fuel diesel demands during the first half of this year.
Monthly diesel sales in 2014, during the last general elections, averaged around 6.2 million tons. This was around seven percent more than the monthly average sales in the other months during the same year.