Demand for diesel in India is set to hit a record in 2019 ahead of the general elections in April and May due to the election rallies, the deployment of polling officers and security officers.
Budget 2019 shows 190 billion rupees ($2.67 billion) for building roads in the countryside, where two-thirds of Indians live.
Aman Verma, a research analyst at Wood Mackenzie stated that “Increased travel activities for campaigning and implemention of infrastructure projects ahead of the elections will bolster diesel demand in the first half of 2019.”
India is a driver of global oil demand, being the world’s third-largest oil user. The surging diesel demand is of great concern in 2019 because of slowing economic growth. The boom in crude consumption may help underpin oil and fuel prices. Diesel demand also got benefits by implementing nationwide GST.
“The GST has led to the removal of interstate taxes. This is a structural shift, resulting in increased demand for heavy and medium-duty trucks to achieve economies of scale and operational efficiency,” Aman Verma added.
Country’s diesel demand to burgeon this year by 5.7 percent and 6.4 percent, respectively, from 2018 stated by the analysts at Fitch Solutions and consultants at Wood Mackenzie forecasts. According to the reports by the Ministry of Petroleum, India holds the record of consuming 6.9 million tonnes of diesel a month, or about 1.7 million barrels a day in 2018. In the government data presentation of financial year 2018-19, India’s economy is expected to grow by 7.2 percent as compared to the previous year’s growth of 6.7 percent.
The chairman of India Oil Corp, Sanjiv Singh stated that, “There is strong energy demand which is bound to happen because of different sectors… We are a diesel driven economy. The bottom-line remains that energy demand is bound to grow. We’re seeing GDP at more than 7 percent, (and)…a lot of urbanization.”
Peter Lee, an analyst at Fitch Solutions said that “Tied to a constructive GDP outlook – and alongside the country’s positive demographics, low vehicle penetration and loose monetary policy – is our forecast for rapid growth in vehicle sales, which again will be positive for diesel. Diesel count account for nearly a quarter of new vehicles in India.”
According to the comparative report of 2015 from the International Organization of Motor Vehicle Manufacturers, India held 22 cars per 1,000 people versus 821 cars per 1,000 people in the United States. By the data of Refinitive Eikon, Indian sales of commercial vehicles, which largely run on diesel, rose to a record last year, and Jan 2019 sales climbed to 87,600, a record high of this time of the year.
New Delhi will hold on to the increased crude oil demand despite of the air pollution concerns due to the polls in April and May. By reducing the percentage of sulfur from the diesel pool, India’s fuel standards have been improved over the last few years. By April, the capital city of India will adopt the so-called Bharat VI standard that is qual to the most stringent European standard, which the rest of the country will adopt next year.
Also, there’s a face off between the Diesel consumption automobiles and Electric vehicles. Though EVs are not making much an impact in the country at this moment but the Indian government has set a target of EVs making up 30 percent of new car and motorcycle sales by 2030 from less than 1 percent today. According to Wood Mackenzie’s report on demand and sales of EVs, Electric car sales actually declined by 40 percent to a mere 1,200 units in financial year 2018 over financial year 2017. The count of electric two-wheeler sales rose 138 percent to 54,800 units during the same period.