“India’s Petrol and Diesel Consumption Declines in June and July 2023: Analysis of Impact on Mobility, Mining and Construction Activity”

After scaling a historic high in May 2023, India’s petrol and diesel consumption declined in June and July as rains restricted the mobility as well as mining and construction activities across the country.

According the Petroleum Planning and Analysis Cell (PPAC) data for July 2023, India’s diesel consumption slipped 13 per cent m-o-m to 6.9 million tonnes (MT) on a provisional basis, while petrol consumption fell 9 per cent to 2.9 MT.

“The impact on mobility reflects the lower demand for auto fuels. Monsoons impacted mining and construction activity. Besides, diesel demand from the farm sector is muted right now. With travel and tourism activities down, the gap was more pronounced in July compared to June,” an official with an oil marketing company (OMC) said.

Diesel demand will pick up during the sowing season.

The consumption is unlikely to pick up in the next two months due to rains. In general, June-September is a period of low mining and construction activity, he added.

Overall, the demand for refined petroleum products fell by 7 per cent m-o-m to 18.1 MT in July 2023 from 19.4 MT in June.

However, the consumption of liquefied petroleum gas (LPG) rose 9 per cent to 2.4 MT last month from 2.2 MT in June 2023. The usage of naptha, a key feedstock for petrochemicals, was higher by 9 per cent to 1.1 MT.

Despite rains, the consumption of aviation turbine fuel (ATF) managed to grow by 3 per cent m-o-m to 664,000 tonnes, largely aided by international travel during the month. Monsoon is a lean period for the airlines.

According to analysts, demand for petroleum products will rise during the October-December quarter aided by rising industrial activity and preparations for the festival season.

ICICI Securities in a June 2023 report said that after the last 3 years (FY21, FY22 and FY23) of relative weakness, Indian fuel consumption will grow steadily over the next two years.

Stronger economic growth in the next 2-3 years and the potential pass through of the supernormal marketing margins being earned on retail fuels would spur better pricing power for petrol and diesel.