Is India the Next China for Oil Demand Growth?

Oil suppliers see India as the next big driver of new global demand as growth slows in China, the world leader in demand growth so far this century. But while India does figure to be the largest source of incremental oil demand this decade, there is little chance it will match the pace of growth China has shown over the past 20-plus years. Internal dynamics in India and a different strategic approach than China to domestic development will cap the growth potential of India’s oil demand, even though its peak is likely still decades away. India has already overtaken China to lead the world in oil demand growth; Energy Intelligence expects the country to add 197,000 barrels per day of demand in 2025 to its current 5.8 million b/d compared to China’s estimated 102,000 b/d of growth this year. Energy Intelligence sees Indian growth slowing in 2026 to 179,000 b/d, while others see demand accelerating next year — Opec and the US Energy Information Administration see India’s 2026 demand growing by 250,000 b/d and 280,000 b/d, respectively. India is the world’s most populous country and its fastest-growing major economy. But the speed and scale of India’s demand expansion will struggle to replicate the magnitude of China’s boom. China’s oil consumption more than doubled in the decade following its entry into the World Trade Organization in December 2001, adding nearly 500,000 b/d a year over that time. India added 125,000 b/d per year in the same period, including 170,000 b/d annually over the past 10 years. It has rarely matched the intensity of Chinese growth, maxing out at 390,000 b/d added in 2004. Energy Intelligence sees Indian oil demand peaking in the 2040s at around 9 million b/d, although India’s oil ministry has said domestic demand will hit 11 million b/d by 2045. The International Energy Agency sees Chinese demand peaking in 2028 at 16.9 million b/d.

China’s relentless demand growth through 2023 was supported by a centrally orchestrated push into heavy industry, export-led manufacturing and nationwide infrastructure development. India, by contrast, is following a more decentralized and services-led path to development, with a more fragmented energy policy. Oil growth in India is driven by domestic consumption and individual mobility, leaving it more sensitive to swings in consumer sentiment. Indian demand is weighted toward transport fuels like diesel and gasoline, with less pull from industrial and petrochemical sectors. Diesel has accounted for 30% of India’s oil demand growth over the past decade. Gasoline demand is also rising, supported by growing car ownership, although growth in auto sales has slowed this year. Unlike China, mobility electrification in India has happened mostly in the two- and three-wheeler fleet, and overall electric vehicle (EV) penetration is still less than 8%, according to the Federation of Automobile Dealers Association. Petchems have played a central role in Chinese demand growth the past decade, serving the massive investment Beijing has made in downstream infrastructure. The downstream build-out in India has been slower and less coordinated. India currently has 5.3 million b/d of refining capacity and is planning to expand to 6.3 million b/d by 2028. New Indian facilities will have more petchem capacity, but only 5% of the existing state-owned downstream fleet is geared toward chemicals.

Passenger car electrification in India is on the rise, but growth is slow, especially compared to the rapid uptake in the Chinese sector. EV prices are falling and battery technology is improving, but internal combustion engines likely will still dominate India’s fleet through at least the early 2030s, and the country lacks the vertically integrated EV ecosystem that China built over the past decade. Despite this, the electrification trend will likely shave some volume off India’s gasoline demand curve relative to a conventional growth path. India has a dearth of substantial domestic battery-cell production capacity and reliable charging networks, and it has no clear national road map for EV expansion. Most EV components are imported, raising costs and leaving the sector vulnerable to supply chain shocks and trade risks. While electrification will have an increasingly visible role in India — especially in urban transport — it is unlikely to displace enough demand to trigger a peak in gasoline consumption this decade. On the heavy-duty transport side, Indian truckers have been slower to adopt LNG as an alternative fuel, unlike in China, where government incentives have helped spur demand for LNG-fueled trucks. India’s chronic traffic congestion and uneven highway expansion are also actively constraining its road-transport growth — the country did not undertake a large-scale expansion and upgrade of its national and provincial road network like China did in 2000-13. Air travel will be another source of demand growth in India; the country now ranks as the third-largest air transport market in the world. But at 300,000 b/d, Indian jet fuel demand remains less than half that of China’s. India’s jet demand has grown about 6% per year since 2023 compared to China at 11%, Energy Intelligence reckons.

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