India's Oil Demand On Verge Of "Take-Off" -- Oxford Institute For Energy Studies -- March 15, 2016

Updates

March 18, 2016: John Kemp tweeting / Reuters reporting -- India's gasoline demand growing at fastest rate ever. 

March 16, 2016: tweeting now --  State-owned Indian Oil Corp. earmarks $26 billion in investment over 5-7 years.

Original Post

 

This may be a document folks want to save as a PDF file.

I have a page which I call "the big stories."

At that page, I follow India under the heading, "natural gas and coal in post-nuclear world."

At the time I placed India there, I did not have a "placeholder" for India and oil and for the sake of keeping that page as clutter-free as possible, I won't add India / oil demand. I'll either leave that page as is, or change the heading to a more general "Energy in a Post-Nuclear World."

Whatever.

I say all that to say this. A reader just sent me a most interesting article on India's need for oil. I told him:

I have a regular reader who reminds me about India every month or so. I think India is off the radar scope of every American. For the past 20 years, the global economy has been all about China. At some point, maybe starting in 2020 (if not sooner), the global economy will be all about INDIA and China. China plateaus and India surges.

As noted above, this article is a must-read. I don't know if it might be lost in the ethernet someday, and that's why I recommend  saving it as a PDF file.

The article: India's Oil Demand: On the Verge of 'Take-Off' -- from The Oxford Institute for Energy Studies.

The abstract:

Over the last decade, non-OECD oil demand growth, and by extension global oil demand growth, was driven mainly by China, which accounted for half to two-thirds of this growth.

However, since the Chinese government embarked on a deliberate policy of rebalancing, the country's annual demand growth has slowed to under 03 mb/d, compared to an average demand growth of over 0.5 mb/d in the 10 years prior to 2013. In this new era of slower Chinese growth, a new contender has emerged: India, which in 2015 was the main driver of non-OECD oil demand growth.

In this paper we argue that in addition to the boost from low oil prices, structural and policy-driven changes are underway which could result in India's oil demand "taking off" in a similar way to China's during the late 1990s, when Chinese oil demand was at levels roughly equivalent to current Indian oil demand. These changes include: a rise in per capital oil consumption (reflected in rising motorization of the Indian economy), a massive program of road construction (amounting to 30 km/day), and a push towards increasing the share of manufacturing in GDP by 2022 (which could increase oil consumption by at least a third based on a conservative linear estimate). This paper also examines the implications of a take-off in domestic demand for India's recently acquired status as a net petroleum product exporter.

Some data points:

• India, not China, is now driving non-OECD oil demand growth
• world demand growth is at its strongest since 2010 -- remember, this report was released this month; mainstream media would have us believe global demand (because of China) for crude is oil is declining
• growth demand in 2015 was independent of stimulus (although the 50% fall in oil prices provided a significant boost to consumer demand)
• China is slowing down; the new kid on the block looking for growth: India
• India is soon likely to overtake Japan as the 2nd-largest oil consuming economy in Asia
• India's GDP growth is estimated to have overtaken China's in 2015 (7.2% vs 6.9%)
• India's history of oil demand for the past decade suggests a pattern consistent with countries at relatively early stages of income and development
• the upsurge in India's oil demand growth in 2014 and 2015 suggest that "something is going on"
• Section 3 of the white paper discusses the concept of "take-off" in economic growth and energy use
•  Figures 7 and 8 compare car ownership / penetration between India and China. India has 20 POVs/1,000 people; China has an astounding (by comparison) 90 vehicles / 1,000 people
• China has 80 million POVs; India has less than 15 million
• India has embarked on massive program of highway construction, aiming to construct 30 km of highway roads per day

Oil consumption by country (Asia), 1000 bbls/day:

• China: 10,480 (2013); it was 8,938 in 2010;
• Japan: 4,350 (2014); it was 4,429 in 2010; DECREASE
• India: 3,660 (2013); it was 3,305 in 2010; SIGNIFICANT INCREASE
• Korea: 2,340 (2014); it was 2,269 in 2010;
• Australia: 1,079 (2014)