With oil prices rising over the past one and a half month, IOC chairman said if the trend continues, the nation’s consumers would explore alternatives such as electric vehicles and gas as more cost effective.
Chairman of Indian Oil Corporation (IOC) Sanjiv Singh has warned the Organization of Petroleum Exporting Countries (OPEC) to start reducing oil prices or expect demand from India to sink, Bloomberg reported.
“Demand cannot be seen in isolation to prices, especially for a price sensitive market like India,” Singh said.
With oil prices rising over the past one and a half month, Singh said if the trend continues, the nation’s consumers would see alternatives such as electric vehicles and gas as more cost effective. This would replace 1 million barrels of the country’s daily oil use by 2025, he noted.
“You may not see an impact on demand in the short term, but in the long term, definitely it will have implications,” Singh pointed out.
Several factors such as US sanction on Iran, trade war and outages from Libya and Venezuela fueled fears of a global supply crunch, which led to a 5 percent jump in crude prices.
While the OPEC agreed on a modest increase in oil production by about 1 million barrels per day (mb/d), or 1 percent of global supply from July, the additional barrels may not be enough to meet growing demand.
US President Donald Trump in a series of tweets slashed out at the cartel. He has accused OPEC of driving fuel prices higher and stepped up pressure on US ally Saudi Arabia to raise supplies to compensate for lower exports from Iran.
India’s oil consumption is expected to grow to 10 million barrels a day by 2040, making it the fastest growing consumer worldwide. If crude prices rise at this pace, the cost will be seen as too expensive, that will result in a decline in demand, Singh explained.
"If instead of $83, prices reach $100 by 2025, then other forms of energy will become more competitive," Singh added.
He stressed that IOC is preparing to accommodate for alternatives to crude by exploring options such as natural gas, renewables and electricity to power vehicles. The company is building a liquefied natural gas import terminal in southern India and is testing India’s first hydrogen fuel cell-based bus with Tata Motors Ltd.
Experts argue that alternative energy may not be a substitute for 1 million barrels of crude per day."India’s growing economy will propel its demand for gasoline and diesel, and it will be no mean feat to find alternatives,” Kumar said. Natural gas as a transport fuel “is unlikely to challenge the dominance of oil products till India becomes self-sufficient in natural gas production, which is at best a long-term prospect. Pressure is on OPEC to do more from key customers, including India," said Abhishek Kumar, a senior energy analyst at Interfax Energy.