From UPSC perspective, the following things are important :
Prelims level : International Energy Agency (IEA)
Mains level : Read the attached story
- India’s burgeoning economy is poised to become a significant player in global oil demand, with projections indicating that it will outpace China by 2027.
- The International Energy Agency (IEA) forecasts robust growth in India’s oil demand, driven primarily by industrial expansion and increasing mobility.
About International Energy Agency (IEA)
|Autonomous inter-governmental organisation within the OECD framework
|Works with governments and industry to shape a secure and sustainable energy future for all
|Founded in 1974 to ensure the security of oil supplies
|Created in response to the 1973-1974 oil crisis
|Consists of 31 member countries and eleven association countries
|Criteria for Membership
|Joined as an Associate member in 2017
|Key Reports Published
|World Energy Outlook, World Energy Balances, Energy Technology Perspectives, World Energy Statistics, Net Zero by 2050.
India’s Projected Growth in Oil Demand
- Dominance in Oil Demand Growth: India is expected to surpass China as the biggest driver of global oil demand growth by 2027, according to the IEA.
- Magnitude of Increase: The IEA projects an increase of nearly 1.2 million barrels per day (bpd) in India’s oil demand by 2023, contributing to over a third of the global demand growth by the end of the decade.
- Key Drivers: Diesel consumption emerges as the primary driver of India’s oil demand growth, accounting for nearly half of the nation’s demand rise and a significant portion of global demand growth.
- Sectoral Analysis: While jet-kerosene demand is expected to grow substantially, petrol demand is projected to increase moderately due to the electrification of India’s vehicle fleet.
Factors Influencing Demand Growth
- Impact of EVs and Biofuels: Increased penetration of electric vehicles (EVs), energy efficiency measures, and growth in biofuels consumption are anticipated to mitigate around 500,000 bpd of additional oil demand by 2030.
- Role of EVs: EV penetration alone is projected to displace 200,000 bpd of oil demand by 2030.
Why such a forecast for surge?
- Rising Crude Oil Imports: India’s crude oil imports are expected to surge by over a fourth to 5.8 million bpd by 2030, driven by robust demand growth and declining domestic production.
- Limited Domestic Production: Despite efforts to attract foreign investment, domestic crude oil production is projected to decline steadily, further increasing import dependence.
- Strategic Petroleum Reserves (SPRs): India is enhancing its capacity to respond to oil supply disruptions through strategic petroleum reserves.
- Importance of SPRs: These reserves help mitigate the impact of emergencies on energy supplies and ensure oil resilience in case of market disruptions.
Major Policy Initiatives for Oil Import Cut
- Urja Sangam 2015: In March 2015, the PM inaugurated ‘Urja Sangam 2015,’ aiming to boost India’s energy security. Stakeholders were urged to increase domestic oil and gas production to reduce import dependence from 77% to 67% by 2022 and further to 50% by 2030.
- Production Sharing Contract (PSC) Regime: The government introduced policies like PSC, Discovered Small Field Policy, Hydrocarbon Exploration and Licensing Policy (HELP), and New Exploration Licensing Policy (NELP) to incentivize domestic production.
- Ethanol Blending Programme (EBP): India promotes the EBP to reduce crude oil imports, cut carbon emissions, and boost farmers’ incomes. The target for 20% ethanol blending in petrol (E20) was advanced to 2025 from 2030, expediting ethanol adoption as an alternative fuel.
- Diversification Strategies: India must focus on diversifying its energy mix and promoting alternative fuels to reduce reliance on oil imports.
- Investment in Renewable Energy: Accelerated investment in renewable energy sources such as solar and wind power can mitigate the growth in oil demand and enhance energy security.
- Policy Initiatives: Robust policy measures are essential to incentivize energy efficiency, promote electric mobility, and encourage sustainable practices in the transport sector.