India is expected to see less growth in gasoline and diesel demand this year after a series of price hikes last month that reflect higher oil costs triggered by the Iran war, with early signs of stress already visible in the trucking sector.
State retailers Indian Oil, Bharat Petroleum
and Hindustan Petroleum implemented four
rounds of price hikes since mid-May after holding off earlier
due to elections. Gasoline prices are now 7.8% higher while
those for diesel are up 8.6%.
Analysts say there could be more price increases that are
likely to dampen demand further, given that the retailers are
still selling the fuels below market rates and are losing a
combined 5.5 billion rupees ($57 million) daily.
Slowing growth in fuel sales for India, the world’s
third-largest importer and consumer, is set to dampen the
outlook for global demand now that transportation fuel
consumption in China has peaked.
“We expect India’s gasoline demand growth to drop to around
3.5-3.7% in 2026 amid reduced discretionary driving,” said Dylan
Sim, an analyst at FGE NexantECA.
That compares with an earlier estimate of 4% growth. The
consultancy has also cut its forecast for growth in diesel
demand to 2% from 2.5%.
Moody’s Indian rating arm ICRA has revised down its forecast
for gasoline demand growth for this financial year to 3% to 4%,
compared with 5% to 6% before the war. For diesel, it expects
demand to stay flat or shrink versus an earlier projection of 2%
to 3% growth.
Prashant Vashisth, senior vice president at ICRA, said that
the diesel and gasoline price hikes could exacerbate inflation
which could hurt end-user demand.
Increases in logistics and shipping costs, also stemming
from the Middle East conflict, could lead to “weak industry
growth which would negatively impact diesel demand,” he added.
TRUCKERS AFFECTED BY LESS INDUSTRIAL ACTIVITY
Global oil prices have surged 40% to trade near $100
a barrel since the war restricted shipments through the Strait
of Hormuz, which used to see a fifth of the world’s oil supplies
pass through before the conflict.
Signs of lower diesel demand due to slower industrial
activity have emerged in the trucking sector.
Freight prices have fallen between 13% and 15% on
three-quarters of key long-haul routes despite the increase in
retail fuel prices, said SP Singh, senior fellow at the Indian
Foundation of Transport Research and Training.
Singh noted that drivers are having to wait longer periods
before making return trips.
“Truckers are not getting return tonnages. There is a delay
of 3-5 days because manufacturing has slowed, that is hitting
their revenue as their round trips per month have been reduced,”
he said.
Preliminary data showed that Indian retailers’ gasoline
sales in May rose 2.8% from a year earlier while gasoil sales
edged up 0.9%. That compares with April figures of a 6.8% climb
for gasoline and a 0.8% increase for gasoil.
Source: Khaleej Times