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Opinion: India’s gasoline consumption shows no sign of being slaked

India's gasoline consumption

BP has been granted permission to open up 3,500 fuel stations to help meet expected increases in India’s gasoline consumption.

India’s gasoline consumption up over 12 per cent in 2016

By John Kemp

LONDON, Jan 10 (Reuters) – India’s gasoline consumption continues to grow rapidly as an increasing number of individuals purchase their first motorised vehicle, helping drive the fastest growth in fuel demand in the world.

India’s gasoline consumption rose more than 12 per cent in 2016 compared with 2015, according to preliminary fuel sales figures compiled by the Ministry of Petroleum and Natural Gas.

1-india-gasoline-consumption-monthlyMotor spirit consumption averaged 574,000 barrels per day in 2016, up from 513,000 bpd in 2015 and 447,000 b/d in 2014.

Consumption is being driven by an enormous increase in the number of drivers on the country’s roads for the first time.

The number of registered motor vehicles hit 210 million by March 2015 up from just 105 million in March 2008 (“Road Transport Yearbook”, Ministry of Road Transport and Highways, 2016).

The number of registered motor vehicles is doubling every seven years and shows no sign of being saturated.

2-india-registered-motor-vehiclesVehicle ownership stood at an average of 167 per 1,000 people in 2015, up from 86 in 2007, according to government data.

But penetration rates were still low compared with other developing countries such as Mexico (285), Brazil (290) and Malaysia (396).

And ownership was very low compared with developed economies such as the United Kingdom (517), Japan (598) and the United States (783).

Three-quarters of registered vehicles were two-wheeled motor cycles (154 million) rather than cars (29 million), goods vehicles (9 million) or buses (2 million).

Motorcycles use much less fuel than a car, but run entirely on gasoline, not diesel, and the correct comparison is with the non-motorised transport and buses they are replacing.

Vehicle ownership including motorcycles has become an important status symbol for India’s rapidly growing urban middle class.

3-india-registered-motor-vehicles-by-typeNearly one-third of all motor vehicles are registered to individuals in the country’s million-plus cities according to government data.

The most heavily urbanised states and territories in the union also have the highest rates of vehicle registration per 1,000 population.

4-india-vehicle-penetration-and-urbanisationRegistration rates in heavily urbanised Goa (551), Puducherry (488), Delhi (424) and Tamil Nadu (326) are much higher than in rural states such as Odisha (124), Assam (78), Bihar (46) and Himachal Pradesh (153).

There is enormous potential for India’s fuel consumption to increase as vehicle penetration rates converge with other developing countries and spread from urban centres to more rural areas.

Fuel use will also increase as families upgrade from their initial two-wheeled vehicles to larger and more comfortable cars.

India is therefore one of the most important and natural markets for Saudi Arabia, Iran and other crude producers in the Middle East given the short sea routes.

The country is also critical for the major international oil companies as an outlet for their downstream fuel divisions.

BP has obtained permission to set up 3,500 fuel stations in India because it sees a strong future for transportation demand in India (“BP to set up 3,500 fuel stations in India”, Reuters, Oct. 6).

Other major private and state-owned oil companies are also reported to be interested in establishing retail distribution networks given the strong outlook for fuel consumption.

In absolute terms, India’s gasoline consumption is still dwarfed by China. But India is set to be one of the fastest growing markets for road fuel in the next decade.

(Editing by Susan Thomas)

John Kemp is a Reuters market analyst. The views expressed are his own.

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