Search form

Last updated: 4 sec ago

You are here

Business & Economy

India’s gasoline boom stalls after massive growth in 2014-16

Gasoline consumption growth has been slowing since the middle of 2016. (REUTERS)
LONDON: India’s gasoline consumption has flattened out in recent months after tremendous growth between 2014 and 2016.
India’s motorists consumed 581,000 barrels of gasoline per day between February and April, according to the Petroleum Planning and Analysis Cell (PPAC) at the Ministry of Petroleum and Natural Gas.
Gasoline consumption rose by 4 percent compared with the same period a year earlier, a sharp slowdown from the 14 percent increase between 2015 and 2016.
Gasoline consumption growth has been slowing since the middle of 2016 after surging for the previous two years.
Consumption growth for most other fuels used for cooking and transportation has also been slowing for the last nine months.
Demand for liquefied petroleum gas and kerosene used for cooking, heating and lighting as well as diesel used for transport all show signs of leveling off or actually falling in the first four months of 2017.
The slowdown may have been compounded by the demonetization of large-denomination banknotes announced at the start of November as part of the government’s anti-corruption campaign.
Demonetization resulted in a sharp slowdown in sales of the cheaper motorcycles favored by first-time buyers in rural areas.
Rapid expansion in motorcycle ownership has been one of the major factors driving increases in gasoline demand.
Rising crude oil and refined fuel prices over the last year are also likely to have constrained the growth in consumption and other fuels.
Retail gasoline prices rose by around 10 percent between January 2016 and January 2017 while diesel prices climbed by almost 8 percent, according to data from the Ministry of Petroleum and Natural Gas.
India’s emerging urban and rural middle class is relatively sensitive to increases in the cost of fuel so rising prices have curbed demand growth.
Despite the recent slowdown in consumption growth for gasoline and other fuels, it is too early to determine whether the deceleration is temporarily linked to demonetization and price rises or something more lasting.
But India has been one of the most important sources of oil demand growth during the slump so any prolonged slowdown in consumption growth would make the task of global market rebalancing harder.
• John Kemp is a Reuters market analyst. The views expressed are his own.
LONDON: India’s gasoline consumption has flattened out in recent months after tremendous growth between 2014 and 2016.
India’s motorists consumed 581,000 barrels of gasoline per day between February and April, according to the Petroleum Planning and Analysis Cell (PPAC) at the Ministry of Petroleum and Natural Gas.
Gasoline consumption rose by 4 percent compared with the same period a year earlier, a sharp slowdown from the 14 percent increase between 2015 and 2016.
Gasoline consumption growth has been slowing since the middle of 2016 after surging for the previous two years.
Consumption growth for most other fuels used for cooking and transportation has also been slowing for the last nine months.
Demand for liquefied petroleum gas and kerosene used for cooking, heating and lighting as well as diesel used for transport all show signs of leveling off or actually falling in the first four months of 2017.
The slowdown may have been compounded by the demonetization of large-denomination banknotes announced at the start of November as part of the government’s anti-corruption campaign.
Demonetization resulted in a sharp slowdown in sales of the cheaper motorcycles favored by first-time buyers in rural areas.
Rapid expansion in motorcycle ownership has been one of the major factors driving increases in gasoline demand.
Rising crude oil and refined fuel prices over the last year are also likely to have constrained the growth in consumption and other fuels.
Retail gasoline prices rose by around 10 percent between January 2016 and January 2017 while diesel prices climbed by almost 8 percent, according to data from the Ministry of Petroleum and Natural Gas.
India’s emerging urban and rural middle class is relatively sensitive to increases in the cost of fuel so rising prices have curbed demand growth.
Despite the recent slowdown in consumption growth for gasoline and other fuels, it is too early to determine whether the deceleration is temporarily linked to demonetization and price rises or something more lasting.
But India has been one of the most important sources of oil demand growth during the slump so any prolonged slowdown in consumption growth would make the task of global market rebalancing harder.
• John Kemp is a Reuters market analyst. The views expressed are his own.

MORE FROM Business & Economy