Domestic oil demand growth to halve to 5% in FY24: Govt forecast

Domestic oil demand growth will slow to 5% in 2023-24 after a scorching expansion of nearly 10% in this financial year, the petroleum and natural gas ministry’s Petroleum Planning and Analysis Cell (PPAC) has forecast.

India will consume 233.8 million metric tonnes (MMT) of refined products in 2023-24 compared to the estimated consumption of 222.9 MMT in this fiscal, the PPAC has forecast on its website without offering any explanation for the estimates.

Between April 2022 and January this year, petroleum products consumption increased 9.6% year-on-year to 183.3 MMT, with diesel and petrol consumption surging 14% and 14.5% respectively. The demand for aviation turbine fuel (ATF) has risen 52%.

The PPAC has forecast demand growth of 4.3% for diesel and 7.7% for petrol in 2023-24. The ATF demand growth has been forecast at 16.4%.

Fuel consumption is a barometer of national economic activity, and rapid demand growth this year has been aided by increased industrial activity, consumer demand and vehicle sales. Diesel, which comprises about 40% of demand for petroleum products in the country, is heavily used for long-haul transport, farming and mining activity. Its remarkable growth this year has surprised many industry executives as well. Lower availability of grid power also boosts demand for diesel.

Petrol demand has been supported by the return to office of most employees who had been working from home during the pandemic. A sharp increase in holiday travel has also boosted the demand for petrol, diesel and jet fuel.