Mumbai: India’s fuel demand growth is likely to slow significantly in the coming months as higher fuel prices and government austerity measures affect travel and transportation activity.
Energy analytics firm Kpler has reduced India’s refined fuel demand growth forecast for 2026 by nearly 40 per cent.
The company cut its estimate by around 77,000 barrels per day, reducing projected annual growth to 78,000 barrels per day from the earlier estimate of 128,000 barrels.
Petrol And Diesel Prices Rise
Petrol and diesel prices have increased by nearly Rs 5 per litre since May 15 in three separate hikes.
Oil companies raised prices after global crude oil rates surged sharply in recent weeks.
At the same time, Prime Minister Narendra Modi urged people and government departments to reduce unnecessary travel, conserve fuel and promote remote working to save energy and foreign exchange reserves.
Petrol Demand Faces Biggest Impact
Analysts believe petrol demand may see the sharpest slowdown.
Petrol demand growth estimate has been reduced from 63,000 barrels per day to 38,000 barrels per day.
Experts say weaker commuting activity, lower discretionary travel and fuel-saving campaigns are reducing consumption.
Diesel demand growth estimates have also been lowered, while jet fuel demand growth has been cut almost 50 per cent due to expectations of slower air travel and tighter consumer spending.
Rupee Weakness Adds Pressure
The report said India’s economic situation has become more difficult after rising tensions in the Middle East and the US-Iran conflict.
The rupee has weakened nearly 6 per cent since the conflict began and around 10 per cent over the past year.
Higher crude oil import costs and rupee depreciation are increasing pressure on inflation and state-run oil companies.
Oil Companies Under Stress
Despite recent fuel price hikes, retail fuel prices are still below estimated breakeven levels for government-owned oil companies.
Before the recent revisions, state-run fuel retailers were reportedly losing around Rs 1,000 crore daily due to high crude oil costs and currency weakness.
Russian Oil Continues To Help
India’s large imports of discounted Russian crude oil continue to support the domestic fuel market and help reduce pressure on fuel supplies and prices.
Analysts said unless crude prices fall and the rupee stabilises, more fuel price hikes and stricter fuel-saving measures may be unavoidable.
