India Overtakes Japan in Oil Demand


"Industry experts say India's energy demand can only go up."

India overtook Japan in demand for oil among Asian nations in the second quarter of 2010, reflecting its rapid economic growth, according to Platts.

The country's demand for oil in April–June stood at 3.1M barrels per day (mbpd), marginally higher than Japan's 3 mbpd. China, with a demand thrice the size of India's, registered the highest demand for oil in Asia.

"The growth in India's oil demand is an indication of an economy doing well," said Vandana Hari, editorial director, Asia, Platts. "The Indian economy was not as badly hit by the slowdown in 2008 as it is not as dependent on exports as China or Japan, and staged a faster recovery than its Asian counterparts."

Industry experts say India's energy demand would only increase, but needs to be managed with efficient demand- and supply-side intervention for it to remain insulated from price shocks.

"The barrel per-capita consumption of oil remains very low in India compared with China or other developed countries and the demand can only go up," said Arvind Mahajan, executive director at audit and consulting firm KPMG. "However, since India is primarily dependent on imported crude, the government needs to work out a pricing mechanism that would make domestic oil prices internationally linked to ensure energy-efficient demand."

Deregulation of petrol prices in June was a step in that direction, and Hari said this is the right time for further freeing of petrol and diesel prices in India as crude prices are not too high at the moment.

"Latest predictions by the IEA suggest that crude prices are not likely to too volatile over the next two-three years," said Hari, "and this could be the best time to complete the deregulation of fuel prices, including freeing up diesel prices."

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