India's demand for petrol is projected to reach its zenith by 2035, according to A S Sahney, Chairman of Indian Oil Corporation (IOC). This significant forecast highlights a transformative period for the country's energy sector, influenced heavily by the rising adoption of electric vehicles (EVs), increased ethanol blending in fuel, and the growing use of gas-powered vehicles.
Addressing an industry event, Sahney noted, "Motor spirit is feeling pressure from all sides. That's one area of concern." This evolving fuel consumption landscape presents both challenges and opportunities for Indian refiners, necessitating strategic adaptations in their operations and investment plans.
Shifting Fuel Consumption Patterns
While gasoline demand is expected to plateau, other petroleum products are set for continued growth. Demand for diesel and aviation turbine fuel (ATF) is anticipated to keep rising, fueled by ongoing industrial expansion and a bustling aviation sector. Similarly, heavier petroleum products like fuel oil and petroleum coke, which constitute approximately 30% of refining yield, are also projected to see increased demand.
Addressing Import Costs and Shipping Challenges
In a separate but related discussion, Sahney emphasized the critical need for India to bolster its shipping capabilities. He argued that a stronger domestic shipping fleet would allow Indian refiners to more effectively capitalize on discounted crude oil imports, as current high freight costs are significantly eroding these benefits.
"We have been neglecting shipping... we have to build our capabilities in shipping. Today we are getting crude at discount but freight is eating that up. Freight is a killing factor," Sahney stated.
Record-high freight rates for Russian oil shipments to India in early October, exacerbated by Black Sea risks and a global surge in tanker charges, underscore this challenge. Sahney also called for an expansion of crude oil and liquefied petroleum gas (LPG) storage capacities to create a larger buffer against potential supply disruptions and price volatility.
Impact of Rising Crude Prices and Geopolitical Tensions
India's average crude oil import basket price surged to $120.46 per barrel in October, marking its highest level since March 2012. This increase is largely attributed to heightened geopolitical uncertainty stemming from the West Asia conflict, which has pushed up both freight rates and marine insurance premiums. A weakening rupee against the US dollar further intensifies the nation's import burden.
The country's net oil and gas import bill soared by 35% year-on-year to $81.1 billion during April-September in FY27. Estimates from ICRA suggest that every $10-per-barrel rise in the average crude price for a fiscal year adds approximately $12-13 billion to India's net oil import bill and widens the current account deficit by 0.3 percentage points of GDP. Additionally, public-sector oil marketing companies are grappling with estimated losses of around ₹62,000 crore on LPG sales, further straining marketing margins.