India’s gasoline thirst shows no sign of being slaked: KEMP

India’s gasoline consumption continues to grow rapidly as an increasing number of individuals purchase their first motorized vehicle, helping drive the fastest growth in fuel demand in the world. India’s gasoline consumption rose more than 12 percent in 2016 compared with 2015, according to preliminary fuel sales figures compiled by the Ministry of Petroleum and Natural Gas.

Motor spirit consumption averaged 574,000 barrels per day in 2016, up from 513,000 bpd in 2015 and 447,000 bpd in 2014. Consumption is being driven by an enormous increase in the number of drivers on the country’s roads for the first time. The number of registered motor vehicles hit 210 million by March 2015 up from just 105 million in March 2008 (“Road Transport Yearbook”, Ministry of Road Transport and Highways, 2016).

The number of registered motor vehicles is doubling every seven years and shows no sign of being saturated. Vehicle ownership stood at an average of 167 per 1,000 people in 2015, up from 86 in 2007, according to government data. But penetration rates were still low compared with other developing countries such as Mexico (285), Brazil (290) and Malaysia (396). And ownership was very low compared with developed economies such as the United Kingdom (517), Japan (598) and the United States (783). Threequarters of registered vehicles were twowheeled motor cycles (154 million) rather than cars (29 million), goods vehicles (9 million) or buses (2 million).

Vehicle ownership

Motorcycles use much less fuel than a car, but run entirely on gasoline, not diesel, and the correct comparison is with the non-motorised transport and buses they are replacing. Vehicle ownership including motorcycles has become an important status symbol for India’s rapidly growing urban middle class. Nearly one-third of all motor vehicles are registered to individuals in the country’s million-plus cities according to government data.

The most heavily urbanised states and territories in the union also have the highest rates of vehicle registration per 1,000 population. Registration rates in heavily urbanised Goa (551), Puducherry (488), Delhi (424) and Tamil Nadu (326) are much higher than in rural states such as Odisha (124), Assam (78), Bihar (46) and Himachal Pradesh (153).

There is enormous potential for India’s fuel consumption to increase as vehicle penetration rates converge with other developing countries and spread from urban centers to more rural areas. Fuel use will also increase as families upgrade from their initial two-wheeled vehicles to larger and more comfortable cars.

India is therefore one of the most important and natural markets for Saudi Arabia, Iran and other crude producers in the Middle East given the short sea routes. The country is also critical for the major international oil companies as an outlet for their downstream fuel divisions. BP has obtained permission to set up 3,500 fuel stations in India because it sees a strong future for transportation demand in India.

Other major private and state-owned oil companies are also reported to be interested in establishing retail distribution networks given the strong outlook for fuel consumption. In absolute terms, India’s gasoline consumption is still dwarfed by China. But India is set to be one of the fastest growing markets for road fuel in the next decade. — Reuters