Moody’s predicts India will surpass China as the fastest growing energy market in the world by the end of next year, according to a new report by the credit rating agency.
“As Chinese economic activity dials back, we expect its refined product demand growth will moderate to 2.5-3 per cent in 2017-18 which is nearly half of higher CAGR of 5 per cent in 2012-16. Still in absolute terms, China will still account for 48 per cent of Asian R&M demand growth in 2018,” the Moody’s report says.
Still, economic uncertainty in both China and India makes it difficult to determine whether or not India will actually be able to claim the top spot for energy growth.
“Given the oil sector’s reliance on China and increasingly India, we believe demand would face considerable risks if economic growth weakens materially below our expectations,” the report states.
India has suffered falls in the sector
Overall, Asia will continue to import fossil fuels to meet energy demand because refining capacity will be unable to keep up with regional energy appetite.
Last month, India reached a 14-year low in fuel demand as a massive flooding event unfolded over the course of a few weeks in vulnerable metropolitan areas. Assam, West Bengal, Bihar, and Gujarat all suffered from severe rain, causing demand for fuel for cars to drop. Flooded roads tend to lower the thirst for gasoline and transportation-related fuels.
“Severe flooding in parts of the country may have impeded freight and manufacturing activities causing overall demand to contract,” Nevyn Nah from Energy Aspects said. “Also, demand growth was exceptionally strong in August last year resulting in a high base.” Last August’s figures showed 18 percent growth compared to the previous month.
India is ready to buy oil from Russia, the United States, and any other trustable producer as the country’s middle class grows quickly.