Fuel Demand Declines For Second Straight Month In December
A drop of gasoline is seen coming out of a fuel nozzle at a filling station. (Photographer: Andrew Harrer/Bloomberg)

Fuel Demand Declines For Second Straight Month In December

Aggregate demand for petroleum products, including auto and industrial fuels, fell in December for the second straight month despite an uptick in economic activity.

Consumption of petroleum and related products fell by 1.8% year-on-year to 18.6 million metric tonnes, according to data from Petroleum Planning & Analysis Cell.

Overall fuel demand has fallen in all months since March except for a one-month festive season bump-up in October. Still consumption is slowly inching towards pre-Covid levels. Volumes in the April-December 2020 stood at 87.2% that of the level seen a year earlier.

Petrol Consumption

Petrol consumption grew 9.3% year-on-year to 2.7 million metric tonnes in December, led by increased preference for personal mobility following the Covid-19 pandemic, according to Care Ratings.

“Preference for personal mobility over public transportation has led to the improvement in the petrol consumption,” Urvisha H Jagasheth, research analyst at the rating agency, told BloombergQuint over the phone. “This can be gauged by looking at the sales of passenger vehicles and two-wheelers that grew 24% and 11.9% year-on-year.”

Rusmik Oza, executive vice president and head of fundamental research at Kotak Securities said petrol consumption is growing mainly due to opening up of the economy and reduction in lockdown impact. “Commuters are preferring personal transportation instead of public mode due to fear of Covid-19,” Oza said in an emailed response to BloombergQuint.

Diesel Usage

Usage of high-speed diesel, however, declined by 2.7% year-on-year to 7.2 million metric tonnes in December owing to the agitation by farmers in Punjab, Haryana and surrounding areas against the recent farm laws, which affected rail and road movement. Schools and educational institutions continue to remain shut in most parts of the country, resulting in reduced movement of buses and other transportation vehicles.

“Freights haven’t yet returned to pre-Covid levels and it has affected movement of trucks,” Jagasheth said. “Also, diesel consumption is linked to the scale of economic activities. Diesel consumption is getting impacted as the economic activities have not attained the pre-covid levels.”

Other Fuels

  • Kerosene consumption continued to fall in December, with all union territories—barring those of Jammu and Kashmir and Ladakh—and states of Andhra Pradesh, Delhi, Haryana and Punjab having been declared kerosene free.
  • LPG usage, however, rose 7.4% year-on-year, led by increased domestic cooking. LPG coverage in India has increased from 94.3% in 2019 to 99.5% as of Jan. 1, 2021, according to the PPAC.
  • With international air traffic curtailed because of global restrictions to prevent the spread of the pandemic, consumption of aviation turbine fuel slumped by 42.5% over a year ago.

“ATF demand was weak as airlines are operating at below optimum capacity and domestic air traffic is still way below the pre-Covid levels.” Oza said. India’s airline passenger traffic was down 43.7% year-on-year in December, according to data provided by Care Ratings.

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