India's oil demand growth is expected to be significantly lower than initially projected, with analysts predicting a sharp decline in gasoline and diesel consumption. This downward revision is primarily attributed to the ongoing supply shock and rising fuel prices, which have led to a slowdown in transportation fuel demand. The impact of these factors is expected to persist throughout the second half of 2026, according to Kpler and Rystad Energy.
The revised estimates indicate a 30-90% reduction in gasoline and diesel demand growth, with Kpler's figures showing a 39% decrease in refined products demand, equivalent to 77,000 barrels per day (bpd). Gasoline demand growth was cut by 40% to 38,000 bpd, and diesel demand growth was revised down by approximately 30% to 42,000 bpd. These substantial revisions highlight the immediate and significant impact of the supply shock and fuel price hikes on India's oil consumption.
Despite these revisions, analysts do not anticipate a structural decline in India's oil demand, unlike in China, where forecasts indicated a structural fall in road fuel demand even before the Iran war. The expectation is that India's oil demand will recover once the Middle East crisis is resolved. However, the current situation raises concerns about accelerated inflation and further deterioration of India's fiscal and current account balances, adding complexity to the economic landscape.
The supply shock and rising fuel prices have prompted policymakers to implement fuel-conservation messaging and administrative austerity measures. These measures are designed to curb transportation fuel demand growth, particularly in the second half of 2026. The combination of these policies and the economic challenges posed by the supply crisis could have long-lasting effects on India's oil consumption patterns.
In conclusion, the supply shock and rising fuel prices have significantly impacted India's oil demand growth, leading to substantial revisions in forecasts. While a structural decline is not expected, the current situation underscores the need for careful economic management and the potential for long-term changes in India's energy consumption habits.
