cover image: Energy News Monitor, Volume XVII, Issue 20

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Energy News Monitor, Volume XVII, Issue 20

21 Nov 2020

Demand For decades, diesel has underpinned India’s economic growth and the fortunes of its refiners, but the pandemic has caused the nation’s most consumed fuel to lose some of its lustre. Since Covid-19-lockdowns have eased across India, diesel consumption has trailed the rebound in gasoline with trucks remaining idle amid a softer economy. Motor fuel use, however, has benefited from people choosing their own cars and scooters over public transport to avoid the risk of infection. While diesel is still king in India — fuel sales are double that` of gasoline — the uneven demand recovery has created a unique challenge for India’s refiners, just as more headwinds emerge from the use of hydrogen and natural gas in major guzzlers such as trucks and buses. Refiners are expected to focus on making less diesel and more gasoline and petrochemicals to respond to changing demand. RIL has flagged a shift away from transport fuels, while IOC has signalled greater diversification to reduce its dependence on its fuels business. The price advantage of once cheap diesel has also faded. The fuel costs almost as much as gasoline in some Indian states after being saddled with new taxes over the past six years, prompting some farmers to come up with novel alternatives such as liquefied petroleum gas to run water pumps. Farms account for more than eighth of total diesel consumption in India. The demand shift related to the pandemic and broader energy transitioning means refineries that predominantly produce diesel will need to rethink their current output of products, Nayara Energy Ltd, India’s second-biggest private refiner. Petrol sales have fully recovered to pre-Covid level and diesel is down just about 6 percent in the first half of September from a year earlier, signalling people and industry were eager to get on with their lives despite a record jump in infection rates. In the first fortnight of September, petrol sales rose 2 percent from a year earlier and 7 percent compared to August. Diesel sales were down 5.5 percent year on year but rose 20 percent month on month, as per sales data from state-run fuel retailers who control nearly 90 percent of the domestic market. India’s petrol sales rose 2 percent in September – the first increase since the country’s lockdown in late March – signalling demand returning to pre-Covid-19 levels. Diesel sales continue to be below normal but have shown a month-on-month increase, according to provisional data from state-owned fuel retailers who control 90 percent of the market. Petrol sales in September rose 2 percent year-on-year and were up 10.5 percent over the previous month. Diesel sales continue to be in the negative territory, with demand falling 7 percent year-on-year. But the demand was 22 percent higher over August 2020. This is the first time that petrol sales in the world’s third-largest oil importer have risen since the 25 March nationwide lockdown crippled economic activity and sent demand plummeting. Petrol sales rose to 2.2 mt in September as compared to 2.16 mt in the same month last year and 1.9 mt during August 2020. Demand for diesel, the most consumed fuel in the country, fell to 4.84 mt from 5.2 mt in September 2019. Sales were 3.97 mt during August this year. BPCL had stated that petrol sales were almost at pre-Covid-19 levels but diesel is lagging.
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