India’s crude oil demand is on an upward trajectory. Recently, India is set to surpass China in oil consumption growth. This shift is as it marks India’s increasing energy needs and its evolving import landscape. With Russia supplying over 40% of India’s crude imports, the dynamics of the oil market are changing.
Current Supply Landscape
As of 2024, Russia leads India’s crude suppliers, contributing 1.7 million barrels per day (mb/d). Iraq follows with 940,000 b/d, while Saudi Arabia supplies 623,000 b/d. The United States and the UAE also contribute, with imports of 215,000 b/d and 423,000 b/d, respectively. This diverse supply chain indicates India’s strategic approach to securing energy resources.
Future Demand Projections
India’s oil demand is projected to grow by 3.2% in 2025. This growth rate is higher than China’s expected 1.7%. Factors driving this demand include economic growth and increasing petrochemical feedstock requirements. India is becoming a key player in the global oil market.
Crude Diversification Strategies
To reduce reliance on a few suppliers, India is diversifying its crude import sources. Recent diplomatic efforts have opened avenues for long-term agreements with countries like Guyana. This diversification will mitigate risks associated with over-dependence on traditional suppliers.
Expansion of Refining Capacity
India’s refining capacity is set to expand . The HPCL Rajasthan Refinery, with a capacity of 9 million tonnes per annum (MTPA), is nearing completion. This new facility will primarily process imported medium-grade crude. The expansion reflects India’s commitment to meeting rising domestic demand.
Impact of Global Market Dynamics
Global oil market conditions will influence India’s import strategies. The country aims to secure the cheapest available oil to support its growing demand. Attractive discounts on Russian oil have made it a preferred choice, impacting the overall import mix.
Regional Influence on Oil Demand
India, along with Southeast Asia, is expected to drive regional oil demand growth. The increasing consumption patterns in these regions will shape future oil market dynamics. As India continues to grow, its role in the global energy landscape will become more pronounced.
Conclusion
India’s oil demand growth in 2024 signifies a shift in the global energy landscape. The country’s strategic diversification of crude imports and expansion of refining capacity will play important role in meeting its future energy needs.
Questions for UPSC:
- Examine the implications of India surpassing China in oil demand growth for global oil markets.
- Discuss the factors influencing India’s strategy for crude oil diversification in the context of global supply chains.
- Critically discuss the role of refining capacity expansion in meeting India’s growing energy requirements.
- With suitable examples, analyse how geopolitical dynamics affect crude oil supply and demand in emerging economies like India.
Answer Hints:
1. Examine the implications of India surpassing China in oil demand growth for global oil markets.
- India’s growth in oil demand signals a shift in consumption patterns, impacting pricing and supply strategies globally.
- Increased demand from India may lead to higher competition for crude supplies, affecting availability for other countries.
- India’s position as a major consumer could influence OPEC and non-OPEC producers’ production decisions.
- Surpassing China may lead to more investments in Indian energy infrastructure, attracting foreign investment.
- India’s growth may drive technological advancements in refining and energy efficiency to meet rising demands.
2. Discuss the factors influencing India’s strategy for crude oil diversification in the context of global supply chains.
- India’s reliance on a few suppliers poses risks, prompting a strategy to diversify sources to enhance energy security.
- Geopolitical relationships, such as recent ties with Guyana, influence long-term crude supply agreements.
- Economic factors, including price volatility and discounts from suppliers like Russia, guide diversification efforts.
- Environmental considerations push India to seek diverse energy sources, including renewables alongside traditional oil.
- Refining capacity expansion supports the need for a varied import basket to optimize processing capabilities.
3. Critically discuss the role of refining capacity expansion in meeting India’s growing energy requirements.
- Expansion of refining capacity is essential to process increasing volumes of imported crude to meet domestic needs.
- New facilities, like the HPCL Rajasthan Refinery, enhance India’s ability to handle medium-grade crude efficiently.
- Increased refining capacity allows India to reduce dependency on imported finished products, encouraging self-sufficiency.
- Refinery expansion supports economic growth by creating jobs and boosting local economies through infrastructure development.
- Advanced refining technologies can improve energy efficiency, reducing overall costs and environmental impact.
4. With suitable examples, analyse how geopolitical dynamics affect crude oil supply and demand in emerging economies like India.
- India’s diplomatic engagements, such as with Guyana, illustrate how geopolitical relations can open new supply routes.
- Conflicts in oil-producing regions can disrupt supply chains, leading to price spikes and affecting India’s energy security.
- Sanctions on countries like Iran and Russia impact India’s sourcing strategies, compelling it to seek alternative suppliers.
- Trade agreements and partnerships can stabilize supply, evident in India’s efforts to strengthen ties with African nations.
- Geopolitical tensions can lead to strategic reserves being tapped, influencing demand patterns in emerging economies.
