India's Rise to 3rd Place in Oil Demand

Jude Clemente, Contributor, 08//072015 @ 9:53AM, Source

India’s real GDP has been growing by 5-10% per year, up $110 billion in 2014. New Prime Minister Modi’s business reforms could expand the Indian economy by 8% this year, beating China for the first time in decades. At 23% of total energy supply, Petroleum is India’s second largest source, half the market share of coal. Boosted by fallen crude prices, India is expected to overtake Japan to become the world’s 3rd largest oil consumer, at about 4.1 million b/d. India is now where China was a decade ago, and oil consumption is strongly linked to economic growth. Petroleum has no large-scale substitute, so as countries develop and install more extensive transportation systems, oil demand increases. Since 2005, India has been responsible for 20% of incremental global oil demand increase, versus 55% for China.

Compared to last year, India’s oil demand has risen 300,000 b/d, putting the country on track to surpass China in incremental growth for 2015. Because “oil is a global commodity sold on an international market” (why seeking “energy security” is far better than “energy independence"] all oil consuming nations must continually monitor India’s arrival. India imports the great bulk of its oil, and 65% of crude imports come from the risky Middle East, which produces a third of the oil and has half of proven reserves. If/when Western sanctions are lifted on Iran, India has already acknowledged that it wants more imports. After China, India is Iran’s largest oil customer. India is now importing about 285,000 b/d of crude from Iran, up nearly 40% from last year.

Indeed, the Republican party and presidential candidates should loudly be sounding the alarm about a growing U.S. “energy insecurity.” Augmented by a new pipeline that will deliver Iranian natural gas to India, India and Iran have a growing oil and gas alliance, and China and Russia have a growing oil and gas alliance, while we inexplicably continue to block crucial oil and gas links to ally, neighbor, and energy powerhouse Canada. Our leaders must know that oil and gas will still constitute at least half of our energy for decades to come, even in the best case for renewable energy.

Although Indians make less than 5% of what Americans make, India’s strong economic growth is trickling down to rising personal incomes, up 40% since 2008. The world’s poor want and deserve the same personal mobility Westerners have enjoyed for a century. India’s Middle Class could reach 45% of the population by 2030, up from 22% today and 4% in 2000. With 1,270 million people, the latent demand for oil in India is staggering. India has just 40 cars per every 1,000 people, compared to 525 in Western Europe. Bolstered by cheaper cars, lower fuel prices, and solid financing options, India’s passenger-vehicle sales are up nearly 20% this year. And for more economic growth, India’s Prime Minister Modi wants to end government controls on fuel pricing, helping state-run refiners meet rising demand.

Gasoline use is up 20% this year, but still only accounts for 10% of India’s oil demand, versus 20% in China and 47% in the U.S. Fourth globally, behind the U.S., China, and Russia, India now has a refining capacity of 4.5 million b/d, double the capacity of 2006. This is more than any country in the Middle East (Saudi Arabia leads at 2.9 million b/d), and potentially reaching 6.3 million b/d by 2020. Within a few years, India could become the world’s largest market for diesel cars, now standing at over 50% of the fleet. Germany is the global leader but wants more environmental policies to restrict sales. Diesel in India has taken a hit because fuel prices have been deregulated, but the introduction of small diesel engines and a proliferation of popular compact SUVs install an upward trend.

At nearly 12 million people a year, India’s urbanization will also be critical to oil use because urbanites have better access and more money to consume energy. This historic transformation, however, also gives Indian officials a chance to buffer expanding consumption. India is an emerging market where oil isn’t as entrenched in the demand structure as it is in the West. More efficient vehicles, a focus on oil as a designed transport fuel (transport is only 40% of India’s oil demand versus 75% in the U.S.), and improved/more expansive public transportation systems are three key strategies. Superhighways are being built and initiatives to reduce congestion are working , but numerous projects are running years behind schedule.

Too many Westerners with all the energy they need are unaware that it’s those humans that DON’T have access to modern fuels such as petroleum that make less money and live less healthy, shorter lives. India is easily the most energy deprived nation on Earth, wherea staggering 960 million people live on less than $2 a day, 700 million lack access to modern energy systems like oil, and 310 million have no access to electricity, the foundation of modern society.

This unacceptable calamity is why the claim that India must first become more “energy efficient” is so utterly backwards. India’s immediate needs are clear: an immense energy growth strategy to give citizens a legitimate shot at a better life. Illustrating the urgency, India has 650 million people under the age of 25, meaning that India has more people under 25 than the entire populations of the U.S., Brazil, and Japan combined.

The case of India exemplifies that the true “world’s greatest problem” is an insidious Western push that’s making worsening global poverty an afterthought to computer-modeled predications. The real “moral challenge of our time” is that the world doesn’t have nearly enough energy, not the false Western-based assertion that “the world is using too much energy.”

More reliable, cheaper, and readily available oil, coal, and gas have been the enabling energy supply for our own incredibly higher standards of living.

Any hypocrisy to limit these essential energy options for the developing world should be rejected by the environmental movement: it drastically erodes human progress and our creditability. The world’s poor surely scoffed, for instance, when U.S. Secretary of State Kerry’s flight to India to rail about fossil fuel use devoured 20,000 gallons of oil-based jet fuel – as much oil product as 185,000 Indians use in an entire day.

In actuality, Secretary Kerry and other leaders should be encouraging more petroleum use in India, not less. Oil allows for true globalization, is the world’s most important fuel, and is irreplaceable where higher usage means higher human development. On average, Indians consume just 0.11 gallons of oil products a day and live until age 66, while Americans consume 2.6 gallons and thrive until age 80.