Global Oil Demand: Will India Delay the Inevitable Peak Beyond 2030?

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Global Oil Demand: Will India Delay the Inevitable Peak Beyond 2030?
Credit: © Reuters.

In the oil markets, two pivotal questions dominate discussions: When will shale oil production peak, and when will global oil demand reach its zenith? According to prevailing consensus, global oil demand is expected to peak around 2030. If this projection holds true, it would signify a monumental shift in the oil industry, comparable to the historic impact of Edwin Drake's oil discovery in Pennsylvania.

One of the key factors driving this forecast is China. While oil demand among OECD countries peaked in 2003, China's voracious appetite for oil has fueled global consumption growth over the past two decades. Since 2000, China has contributed to an astounding 50% of the world's net oil consumption growth, with its demand reaching 16.4 million barrels per day (MMbbls/d) last year, second only to the United States. However, China's growth is showing signs of deceleration. Recent analysis by Bernstein Energy suggests that China's "golden age" of oil demand is waning. Diesel demand has already peaked, and with electric vehicle (EV) sales surging (44% market penetration recently), gasoline demand is also poised to peak soon. Consequently, China's oil demand is projected to peak at 18-19 MMbbls/d by 2030, after which it will likely enter a prolonged decline, similar to trends observed in Western countries.

As China's oil demand growth slows, attention shifts to potential new drivers. The Middle East, Africa, and India are seen as prime candidates, with India emerging as the most promising. India, with a population nearing 1.4 billion, mirrors China's early 2000s scenario with rapid economic growth and pro-reform policies. As GDP per capita rises, infrastructure develops, and consumption of plastics, automobiles, and air travel increases, driving up energy and oil needs. This raises the question: Could India become the next major driver of global oil demand, postponing the peak beyond 2030?

Currently, India's oil consumption is significantly lower than China’s, at one-third of China's and half of other non-OECD countries’ per capita levels. With a per capita consumption of 1.4 barrels per person, India lags far behind the OECD (12.2 barrels) and the US (21.8 barrels). However, as India’s economy grows, so will its oil consumption. If India’s per capita oil consumption reaches the levels seen in China, its demand could surge to 15 MMbbls/d, representing a massive 10 MMbbls/d increase—more than the combined output of US shale oil.

India's current oil demand mix also highlights significant growth potential. Naphtha, a key component in plastics, represents only 6% of India’s oil product slate compared to 15% in China. Similarly, kerosene and motor gasoline usage are lower, reflecting less air travel and vehicle usage, which are expected to rise with increasing incomes. The big question is how much gasoline demand will grow amidst the rise of electric vehicles.

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    india per capita oil consumption can never equal the OECD'S. as Indians commute mostly by public transport and two wheels. fuel consumption can never equal the OECD'S
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