India to Drive Global Oil Demand by 2020

By 2035, India will consume more oil than Japan, Australia and Korea combined, says IEA chief economist

India is set to become the biggest driver of global oil demand by year 2020,” claimed International Energy Agency’s chief economist Fatih Birol while speaking to ET on Tuesday. “Year 2020 is like tomorrow, from the oil industry’s point of view,” he said, underlining the urgency in his message on the sidelines of the publication of IEA’s World Energy Outlook 2013. 

The Paris-based International Energy Agency (IEA) came out with its annual take on the energy industry’s outlook on Tuesday. Set up by the Organisation for Economic Cooperation and Development (OECD) as a response to the oil shock of 1973-74, IEA advises its 24 member countries on issues related to energy security. IEA’s well-researched monthly as well as annual reports on the energy industry are regarded as unbiased and referred by policy makers, industry as well as academia.
IEA’s World Energy Outlook 2013 predicts the global oil demand to reach 101 million barrels per day (mbpd) by year 2035 from today’s around 87 mbpd. This is a significantly modest projection compared with 108.5 mbpd predicted by the Organisation of Petroleum Exporting Countries (Opec) in its World Oil Outlook published last week.
“There are various estimates available for future global demand, which differ based on the assumptions made,” Birol said. “One reason our estimate is lower maybe because we take into account the effect of current and likely energy efficiency policies by the governments, which will slow down consumption growth,” he reasoned.
The World Energy Outlook 2013 projects global coal consumption to grow 17% by year 2035 while the oil consumption is expected to grow nearly 16% from current levels. Natural gas consumption is expected to grow fastest mainly due to sharp growth in emerging economies such as China. While the high-paced growth in the shale gas and oil output will continue to transform the industry globally, conventional oil production is expected to stagnate to 65 mbpd.
“This does not mean the world is on the cusp of a new era of oil abundance,” cautions the report, which predicts a $128 per barrel price for crude oil till 2035, excluding any impact of inflation. Major oil industry investments during next 20 years will go in trying to maintain the output from existing oil fields. By 2035, transportation and petrochemicals will remain the only two demand drivers for oil. The size of India’s economy and growing population means the country will need more and more energy to continue its growth. Around a quarter of incremental oil demand globally will start coming from India alone post 2020. Similarly, by that time India will be world’s single largest importer of coal, according to IEA’s World Energy Outlook 2013.
“India’s oil consumption will exceed 8 mbpd by 2035, which is more than current consumption of Japan, Korea and Australia combined,” explained Birol.
India faces the challenge of ensuring access to affordable energy in the long-term while minimising the environmental impact.
“For a country like India, policies to improve energy efficiency are most necessary in transportation or electrical ppliances etc,” he added. According to him, India’s coal-based power plants have one of the lowest efficiencies in the world. “Making use of renewables, wherever economically feasible and increasing the share of natural gas,” were the two other measures he suggested. For a country like India, which has grossly neglected the health of its energy sector, thanks to unsustainable subsidies, this report should come as a wake up call. To sustain its economic growth and well being of the ever growing population, bold reforms are called for in the energy sector. 

For a country like India policies to improve energy efficiency are most necessary in transportation or electrical appliances, etc. I also suggest making use of renewables, wherever economically feasible and increasing the share of natural gas 

DR FATIH BIROL
Chief Economist, International Energy Agency