India has emerged as a leading driver of oil demand growth in 2024, surpassing China in fuel consumption growth rate, according to S&P Global Commodity Insights. The country’s increasing fuel consumption has led to accelerated expansion plans among Indian refiners, who are now widening their crude sourcing. India’s peak oil demand is expected to come later than China’s, making it an attractive market for oil players.
In 2025, India is projected to experience a faster growth in oil demand of 3.2 percent, as opposed to China’s 1.7 percent growth rate. India’s oil demand growth rate in the first 10 months of 2024 surpassed that of China, with India’s demand rising by 3.2 percent year-over-year as compared to China’s 0.9 percent growth. This trend is expected to continue, leading to significant refining capacity growth in India in the coming years.
To reduce overdependence on a few oil supplying countries or regions, India is diversifying its crude import basket. Recent diplomatic visits have aimed to bring in crude oil from Africa and Latin America, with a focus on increasing the overall volume of crude imports from various regions. India currently imports oil and gas from the Middle East, Africa, Europe, North America, South America, and South-East Asia.
India’s recent efforts to broaden the scope of its exploration policy beyond petroleum and natural gas, along with the abolishment of a windfall tax on domestically produced crude oil, are expected to attract private and foreign entities into the country’s upstream energy sector. The Rajya Sabha passed a Bill seeking to include shale oil, shale gas, and coal bed methane in the Oil Fields (Regulation and Development) Act of 1948, in addition to oil and gas.
With over 80 percent of its crude oil requirement being imported, India has taken steps to increase domestic crude oil production and reduce imports. The government has implemented various reforms in the upstream sector, providing greater marketing freedom to producers and encouraging investment in domestic oil and gas exploration.India’s growing demand for oil presents a lucrative opportunity for oil players worldwide, with the country projected to lead the region in future oil demand growth. As India continues to expand its refining capacity and diversify its crude import sources, the country’s oil sector is poised for significant growth in the coming years.
