India's Oil Demand Growth Hits Lowest Level Since 2020

India's oil demand growth is projected to fall to its lowest level since the 2020 pandemic, driven by the economic fallout from a conflict in Iran. Kpler Ltd. forecasts growth at 78,000 barrels per day, a nearly 40% decrease from pre-war estimates, while Energy Aspects and Rystad Energy report significant drops in demand for diesel, gasoline, and LPG.

Narendra Modi, the Prime Minister of India, urged citizens to reduce fuel consumption by utilizing public transport and working from home. The economic pressure is compounded by global oil costs surging 40% to nearly $100 a barrel due to shipping restrictions in the Strait of Hormuz. In response, state retailers Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum implemented four rounds of price hikes since mid-May, raising gasoline prices by 7.8% and diesel by 8.6%.

These price increases and slowing industrial activity have severely impacted the logistics sector. The All India Motor and Goods Transport Association reported a 15% to 20% reduction in fleet movement, and freight prices on most long-haul routes have fallen by 13% to 15%. State-run refiners are losing approximately 6 billion rupees daily by selling fuels below market rates. Despite these pressures, analysts characterize the slowdown as a temporary drag on growth rather than permanent demand destruction.