Alternate fuels to hit petrol and diesel demand
Energy consumption cannot grow at current pace, say experts. Petrol and diesel demand have shown steady growth in the country over the last two years. Petrol in the financial year 2015-2016 clocked a demand growth of 15% and is at 11.2% for the first nine months of the current financial year. Diesel, which in 2015-16 grew at 7%, showed a 3.7% growth in the nine-month period, according to Petroleum Planning and Analysis Cell (PPAC) data. However, this is bound to change, say industry experts as the trend may not be structurally viable and alternate fuels may play a larger role.“The GDP’s composition is changing with services inching towards 60 %, which is reducing the energy intensity of the economy. I do not expect demand for petrol and diesel to grow at a higher rate than the GDP. The recent 11-12% annual growth number is an anomaly,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India. “In any country, and specifically for India, energy should track the GDP trend and hence energy consumption cannot structurally grow at the current pace. Energy growth should be in the range of 0.6 to 0.8 times of the GDP numbers, and petrol and diesel as a component of energy will sooner or later have to follow the same correlation,” said an oil and gas analyst from a domestic brokerage firm who did not wish to be named.Vivek Jain, associate director, India Ratings & Research expects petrol demand to grow at 11% in the current financial year and taper down to 8-10% in the next financial year. However, not everyone is convinced. “Taking a long-term view, energy efficiency and efficiency in fuel consumption in vehicles will taper petrol demand,” said the analyst quoted earlier. Several analysts also pointed out a significant contributor to petrol’s double digit growth was the shift in consumption from diesel to petrol. The future for diesel demand in the country looks bleak as alternate fuels like compressed natural gas and liquefied natural gas (LNG) take centre stage. Companies in India are now experimenting with options to run trucks on LNG and two-wheelers on CNG. Experts expect if these trials are successful they will further dent demand for diesel products. Truck transport in the country alone is a significant contributor to diesel demand.
Source: Business Standard/Indian Oil & Gas