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Indian Energy Demand Driven by Emerging Middle Class


Amrita Sen and Anupama Sen with the Oxford Institute for Energy Studies have published an insightful paper entitled “India’s Oil Demand: On the Verge of ‘Take-Off’”. The authors argue that India could be on the verge of a rapid burst in crude oil demand growth equivalent to what China experienced in the late 1990s.

Crude oil price prognosticators should carefully observe physical Indian crude oil imports and refined product consumption for signs of such a surge.

As Mike Rothman with Cornerstone Analytics has astutely observed, China is the only non-OECD country with strategic petroleum reserves, so a sudden increase in Indian apparent demand could signal that the market has underestimated global oil consumption.

India May Surpass Japan in 2016

The International Energy Agency reports that India consumed 4 million barrels of oil per day in 2015 and may surpass Japan as the world’s third-largest oil users this year.

In fact, U.S. crude oil could soon be exported to India.

Indian crude buyers now can use the lifting of the U.S. crude oil export to negotiate transactions bench-marked to WTI, Brent, or Dubai contract prices. For example, Reliance Industries, Ltd, one of the largest crude oil refiners in the world notes it is changing crude oil benchmarks as it makes buying decisions.

India is diversifying not only crude oil benchmarks but also looking to make deals in Russia.

India Is Investing In Roads

India is investing in infrastructure necessary to allow more families to enjoy middle-class lifestyles, including safer and cleaner road transportation, cooking and home heating. The PwC Global Construction 2030 report notes that India is currently building 30 kilometers of new road every day and that the road construction market could overtake Japan as the third-largest in the world within the next five years.

Indian Families Are Investing In Safer And Cleaner Energy Consumption

In their paper Moving Up the Energy Ladder: The Effect of an Increase in Economic Well-being on the Fuel Consumption Choices of the Poor in India, Harvard researchers Rema Hanna and Paulina Oliva argue that as families have access to more commercial and efficient fuels (such as LPG and electricity), families enjoy an increase in well-being as fuel consumption increased. While transitioning poor families from dirty biomass fuel for cooking and heating takes additional investment, Laura El-Katiri and Bassam Fattough’s study of fuel use by poor families in Yemen show that making liquefied petroleum gas (LPG) available reduces the time needed for biomass collection and the production of harmful pollution from burning biomass.

The World Liquid Petroleum Gas Association argues that if a concerted effort is made globally to improve access to clean cook stoves, between 600,000 and 1.8 million premature deaths from hazardous air pollution.

Indian investment in these fuels will benefit families and children.

Indian Business Are Investing In Hydrocarbon Infrastructure

Bloomberg’s Dan Murtaugh reports that Indian Oil Minister Dharmendra Pradhan is working with Iran to “develop a port in Chabahar, near Iran’s border with Pakistan … that may include fertilizer and plants and petrochemical projects.)

Indian investment today in energy infrastructure for tomorrow is allowing families to live safer and healthier lives.

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Tom Morgan

Tom Morgan is an Analyst for Drillinginfo. He has 20 years of experience practicing law with a focus on advocating for public policy to advance energy security and private property rights. Tom received his law degrees from Georgetown University and American University law schools. He hosts the weekly Drillinginfo Energy Minute, and you can find and connect with him on LinkedIn as Tom Morgan.