Petrol consumption jumps as Indian drivers hit roads, diesel demand lags

With the second wave of Covid-19 pandemic over, Indians are hitting roads in larger numbers. With every passing day, the number of vehicles on roads across the country is increasing significantly. The increasing number of vaccination, loosening travel restrictions, and state lockdowns are also playing key roles behind this trend.

With the surge in the number of vehicles plying on roads, demand and consumption of petrol are increasing substantially, reports Bloomberg. According to the report, Indian tourists are hitting roads and heading to popular tourist destinations after months of lockdown and restrictions due to the pandemic, although the respite is probably a brief one as the third wave is looming.

Also, people are not shying away from going out despite the high fuel price that has resulted in increased costs for everything. Petrol and diesel are selling at over ₹100 a litre in many places, reaching an all-time high.

The surge in vehicular activity is driving up petrol demand. The demand for petrol climbed above pre-pandemic levels in July 2021. Talking about it, Senthil Kumaran, head of South Asia oil at industry consultant FGE, said that India’s petrol demand is on the cusp of a V-shaped recovery as movement restrictions have been eased or lifted in several states. "So far, the release of pent-up demand has outweighed the impact of elevated retail prices," Kumaran further said.

According to FGE, motor fuel demand will continue to increase for the rest of this year. It also predicted that fuel consumption averaged 637,000 barrels per day in the second quarter of 2021. It is expected to increase by 12% from July to September.

Interestingly, despite petrol demand and consumption surging demand for diesel is still lagging across India. The key reason behind this is the lack of activity in the public and goods transport sector. People who are going out are avoiding public transport for fear of infection. Instead, they are preferring to travel by car. This is contributing to a hike in petrol use than diesel.

However, diesel use is expected to grow over the next few months, especially during the upcoming festive season. Despite accounting for nearly 40% of total oil products in India, its sales are still below pre-pandemic levels. August was a lean month for this motor fuel.

Mukesh Kumar Surana, the chairman of Hindustan Petroleum Corp, said that HPCL expects festival and winter harvesting would lift demand for diesel in the coming months. Surana expects diesel use will reach to pre-pandemic level or slightly lower by the end of this year.

FGE on the other hand estimates that diesel demand will be higher in the current quarter to 1.6 million barrels a day and 1.77 million barrels a day in the following three months. In the second quarter of 2021, diesel demand in India was 1.5 million barrels a day.

Meanwhile, petrol and diesel prices remain unchanged for the 19th straight day on Thursday. This is the longest pause in the fuel price revision rally since May 3.