Consumption of diesel in the first quarter will be only 3.9% higher from a year earlier, when the national lockdown was imposed, according to FGE. Motor
demand will climb 12.5% over the same period.
The year got off to a shaky start with fuel
sales falling in the first two weeks of January from a month earlier and diesel showing the biggest drop. Farmer protests have affected the movement of vehicles in some states and damped consumption, while record high fuel prices have also dented demand.
Only around three-quarters of India’s trucking fleet is operational, according to Naveen Gupta, secretary general of the All India Motor Transport Congress that represents about 10 million truckers. “Operating costs are at an all-time high because of high diesel prices, but freight has not increased,” he said.
There are signs, however, that the economy of India -- the world’s third-biggest oil importer -- is starting to perk up after shrinking by a forecast 7.7% last year. Seven of the eight high-frequency indicators tracked by Bloomberg News
held steady in December and one deteriorated.
Finance Minister Nirmala Sitharaman is expected to announce generous public spending and measures to put more money into the hands of average Indians when she unveils the federal budget on Monday. Diesel demand should also improve a bit during crop harvesting in March and April, HPCL’s Surana said.
After slumping around 15% last year, full-year diesel consumption will exceed that of 2019 by 3.3%, according to Bloomberg calculations based on figures from FGE and the oil ministry. Gasoline demand, meanwhile, will be about 11% higher this year than in 2019.
Oil consumption is already close to pre-virus levels and should be higher this quarter than the same period last year, Indian Oil Corp. Chairman Shrikant Madhav Vaidya said on Friday. Overall, demand for major fuels -- diesel, gasoline, jet fuel, liquefied petroleum gas, naphtha and fuel oil -- should rise by around 14% this year from 2020, FGE’s Kumaran said. Oil demand will “definitely”recover to 2019 levels by the fourth quarter, he said.
However, R. Ramachandran, the former refineries director at Bharat Petroleum Corp., said that greater use of fuels like liquefied natural gas and compressed natural gas in transport means diesel is unlikely to be as dominant in the Indian energy mix as it was before Covid-19.
“We are witnessing exceptionally good demand for gasoline,” said Ramachandran, who has almost four decades of experience in the Indian oil industry. “But don’t expect diesel to recover to the growth rates of the past.”
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