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The world’s fastest-growing major economy is thirsty for more oil

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AP Photo/ Rajanish Kakade
Fill ’em tanks.
Published This article is more than 2 years old.

The world’s thirst for oil is about to go up a notch as India revs up.

After surpassing Japan as the world’s third-largest crude oil consumer in 2016, India’s demand growth for oil will outpace that of China by 2022, the International Energy Agency (IEA) has said in a report.

Asia’s third-largest economy will also become the world’s third-largest-refiner in 2022, surpassing Russia. These developments, the IEA reckons, will put India at the heart of the world’s oil and energy markets.

“It is not only oil. It is coal. It is solar. It is out of the strong growth in the economy and the population growth,” Fatih Birol, IEA’s executive director, told reporters, referring to India at CERAWeek, a global gathering of energy companies and government officials.

As China moves away from infrastructure-led growth to services and a consumer-led structure over the next decade, its oil and energy demands are expected to take a backseat. China annually consumes three barrels per capita, IEA says; this is expected to dip to 2.5 barrels by 2022.

India, on the other hand, has a per capita oil consumption of 1.2 barrels per year, which is expected to reach 1.5 barrels by 2022. “Although a direct comparison between India and China does not take into account societal and economic differences, the overall point is valid; there is clearly still plenty of growth to come from India,” the IEA report says.

India’s oil imports have swelled from just 34 million tonnes in 1997 to 202 million tonnes in 2016. The Narendra Modi government, with infrastructure growth as its cornerstone, is only likely to add to India’s growing appetite for oil. And this could coincide with a period of high oil prices.

Oil prices have been benign for nearly two years due to a glut. However, subdued investments over the next few years could lead to a significant shortage by 2022, thereby fuelling prices. “The oil market today seems remarkably sanguine about this issue, but this feeling might not persist for too long before the realisation dawns that unwelcome price pressures might lie ahead,” the report said.

The Modi government, on March 07, announced an open-acreage licensing policy, allowing bidders to select areas they want to drill. These auctions will be held twice a year beginning this July. Until now, the government had identified the blocks and then auctioned them.

“We want to increase production. We want to invite investment,” Dharmendra Pradhan, India’s minister of petroleum and natural gas, said on March 06. ”I must tell you there was never a better time to be in India.”

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