India to remain third largest crude oil consumer in next decade

India will be the third largest crude oil consumer in the world in the next decade, said India Ratings and Research on Tuesday. 

However, the country is unlikely to overtake the crude consumption levels of the US and China in the next ten years. 

 "As per the latest BP statistical review, India has emerged as the third largest consumer of crude oil, after US (19.39 Mbpd) and China (11.96 Mbpd) and displacing Japan (4.15 Mbpd) from the third position,"  India Ratings said in a statement. 

According to the ratings agency, India will remain third, even if Indian consumption grows at a compounded annual growth rate (CAGR) of 10% (double the rate of crude consumption growth of 4.8% over 2005-2015) in the next decade. 

Though the country has moved to the third position in crude oil consumption and as it continues to import bulk of its crude needs, this growth will present a problem of energy security, cited the ratings agency. 

The overall primary energy consumption in India measured in million tonnes oil equivalent (Mtoe) has grown by 5.9% CAGR to 700 Mtoe in 2005-15. 

China's overall energy consumption grew by 5.3% to reach 3014 Mtoe, while the US and Japan's energy consumption contracted by 0.3% and 1.5%, respectively.

As the country's growing population will lead to higher energy consumption, the rating agency noted that India "needs to look at lowering its overall energy consumption by bringing in greater efficiency in the usage of end fuels." 

It suggested that the consumption of end fuels like coal can be minimised through better boiler efficiency, scrapping old plants, greater focus on renewable energy generation, among others. 

The consumption of petrol and diesel can be reduced by higher efficiency in vehicles and higher usage of solar power electric vehicles and strengthening of public transport system, India Ratings added. 

India's crude oil consumption during the calendar year 2015 grew by 8.1% to 4.2 million barrels per day (Mbpd) as compared to a contraction of 3.7% recorded by Japan.  

In the last ten years (2005-15), Japan registered a CAGR of negative 2.5% as compared to 4.8% for India during the same period in crude oil consumption, the ratings agency said.

India's crude oil consumption has grown primarily due to strong demand for the end product, with demand growing by 11.2% in FY16 with a strong growth recorded by petrol, diesel, liquefied natural gas (LPG) and Naptha sales at 14.3%, 7.5%, 8.8% and 22.5%, respectively. 

On the other hand, Japan's crude oil consumption has declined due to a drop in Japanese population, people switching to more fuel efficient cars, new cars being electric-gasoline hybrids, a slowing Japanese economy and the closure of oil fired power stations.  

As per Japan's Ministry of Economy, Trade and Industry, the country's demand for fuels like petrol and diesel is predicted to fall by 1.3% annually till fiscal year 2019-20.

Therefore, India Ratings has forecast that Japan is unlikely to show any growth in oil consumption in the next two-three years.