India’s oil demand likely to hit yet another record in 2025-26 as consumption of major fuels set to rise

India’s petroleum consumption has been scaling new heights with each passing year, with the exception of two years when demand was hit because of the COVID-19 pandemic. The revised estimate for the current fiscal—241.68 million tonnes—is slated to be the highest-ever petroleum product consumption level so far, but will likely be topped in the next fiscal. The current record consumption level—234.26 million tonnes—was achieved in FY24.

An analysis of historical data shows that the pre-pandemic record for consumption of petroleum products was 214.13 million tonnes in FY20. Demand took a hit in FY21 due to the pandemic, and posted a modest recovery in FY22. Consumption of most products breached pre-pandemic highs in FY23, and have been rising since.

Unlike many countries, India is seen as a major growth centre for oil demand given the future potential in energy-intensive industries, growing vehicle sales, a rapidly expanding aviation sector, expected growth in consumption of petrochemicals, and a still growing population with relatively low per-capita energy consumption. In fact, India is among the few markets where refinery capacity is expected to expand substantially over the coming years. India currently has a refining capacity of nearly 257 million tonnes per annum.

But given the country’s stagnant domestic oil production, rising demand for petroleum fuels and products is expected to lead to higher oil imports in the foreseeable future. India is the world’s third-largest consumer of crude oil with an oil import dependency of over 85 per cent.

Late December, S&P Global Commodity Insights (SPGCI) had said that India was expected to end 2024 with an oil demand growth rate surpassing that of China, making the South Asian country one of the fastest-growing major oil consumption centres globally.

China is the world’s second-largest consumer of crude oil behind the United States (US), but is the commodity’s biggest importer globally. But oil demand growth in China has been subdued in the post-pandemic era due to a combination of factors. These include a slump in sectors like real estate and construction, investments shifting to sectors that are not oil intensive, declining population, and growing adoption of vehicles powered by electricity and other alternative fuels.

In February 2024, Paris-based International Energy Agency (IEA) had said that India’s oil demand growth was expected to overtake China’s by 2027, making the former the biggest driver of global oil demand growth through the remainder of the decade “underpinned by strong economic and demographic growth”, notwithstanding the growing electric vehicle (EV) penetration, energy efficiency, and rising biofuel consumption.

In numbers: Consumption growth projections

Consumption of all major fuels—diesel, petrol, and liquefied petroleum gas (LPG)—is likely to touch an all-time high in the next fiscal, per PPAC projections.

Consumption of diesel, which is the most used petroleum fuel in the country, is seen rising 2.8 per cent over the current fiscal’s revised estimate to 94.12 million tonnes in FY26. Petrol consumption is seen higher by 6.6 per cent at 42.64 million tonnes. Higher demand for these two fuels usually reflects robustness in the transportation and industrial segments.

LPG consumption is seen rising 4.7 per cent year-on-year to 33 million tonnes. Consumption of ATF, or jet fuel, is projected to register a nearly 10 per cent rate of growth to 9.95 million tonnes in FY26, against the revised estimate of 9.06 million tonnes for FY25. High ATF demand growth is representative of the strong growth in India’s civil aviation market, which is now the third-largest domestic aviation market, and one that is expanding rapidly.

The consumption of petroleum coke, or petcoke, is also seen rising 10 per cent year-on-year to 24.85 million tonnes in FY26, per PPAC projections. Petcoke is used as a fuel in various industries, including power, cement, steel, fertiliser, and glass, apart from being a feedstock in the manufacturing of products like aluminium, paints, and coatings.