By Mohi Narayan and Sethuraman N R
NEW DELHI (Reuters) – Indian transportation fuel demand is expected to rise in the range of 6%-8% in fiscal year 2026, underpinned by rising vehicle sales, even as growth in Asian consumption lags growth in supply due to new refinery expansions in the region, industry executives and analysts said.
India is poised to be the largest driver of global oil demand growth this year, outpacing China, with its fuel demand set to rise through the next decade.
Consumption remains healthy in the country, and gasoline demand is expected to grow about 6-7%, while diesel will rise about 4% in the next fiscal year, chairman of state-run oil giant Indian Oil said on the sidelines of India Energy Week.
The government’s proposal to slash personal income tax rates in its annual budget has raised hopes of a consumption boost in the world’s fifth-largest economy, which could possibly attract more people to buy cars.
State-run MRPL expects gasoline demand to grow 7-8%, while diesel is anticipated to grow 4%, the company’s managing director Mundkur Shyamprasad Kamath said.
Energy consultancy FGE expects a rise of about 40,000 barrels per day to 950,000 bpd in 2025 in India’s gasoline consumption, while diesel demand is expected to hold steady.
FGE estimates Asian overall gasoline supply to grow by around 150,000-160,000 bpd year-on-year in 2025 and demand to grow by around 100,000 bpd in 2025 due to addition of new refineries and expansion in China, India, Indonesia and Thailand.
This will translate to subdued gasoline margins, despite the boost in Indian demand, with analysts expecting cracks to peak at about $10-$11 per barrel over Dubai crude in Asia in the second-quarter of 2025 before slumping seasonally in the last two quarters.
While biofuels blending in transportation fuel has not caused any structural decline in gasoline consumption, India, one of the world’s biggest emitter of greenhouse gases, aims to increase the share of ethanol in gasoline to 20% by 2025-26, from about 18% now.
“With the developments around ethanol-blending in gasoline, our prediction is, motor spirit (demand) is likely to grow in the range of 2-3%, and diesel (demand) is expected to grow in the range of 4-6%, in the year to 2026” Sanjay Khanna, director of refineries at Bharat Petroleum said. (This story has been refiled to add the dropped word ‘gasoline’ in paragraphs 7 and 8)
(Reporting by Mohi Narayan; editing by David Evans)
