Despite the price of petrol inching towards the Rs 100 per litre mark, demand for petrol continued to rise for the fifth straight month in January 2020, rising by 6.3 percent year on year.
The growth trajectory is attributed to greater adoption of personal mobility amidst the pandemic as the economy and general activities open up further. Another contributory factor for the increase in demand for petrol is the marked shift in consumer preference for petrol-engined passenger vehicles compared to diesel.
As per statistics available, demand for petrol rose by 3.3 percent in September, 4.5 percent in October,5.2 percent in November, and 9.4 percent in December last year. As of today (February 11, 2021), petrol was priced at Rs 94.36 a litre in Mumbai.
However, India’s overall oil demand continued its declining spree in January, down by 2.8 percent YoY primarily due to weak recovery in diesel demand from State transport units and the railways. Diesel witnessed a 2 percent decline during the same period.
Further, the country's overall oil demand during FY2021 (till date) continues to be down at 11.6 percent. As per an analysis by JM Financial, if February and March 2021 see normalcy, the domestic demand for oil during FY2021 is likely to contract by 9 percent. While petrol may see a yearly drop of 7 percent, diesel is expected to fall by 12 percent.
The decline in oil demand comes amid the backdrop of moderation in oil demand growth witnessed since 2QFY2019. India’s FY2020 oil demand growth was subdued at 0.2 percent YoY as against the 3.4 percent YoY growth witnessed in FY2019 and 4.5 percent CAGR reported over the past decade, the analysis adds.