As India seeks to implement fuel-saving measures amid record-high crude oil prices and a depreciating rupee, a sharp deceleration in its transportation fuel demand growth may be observed in the second half of 2026. This is coming at a time when fuel prices of petrol and diesel have already been increased by almost Rs 5 a litre over three instalments since May 15.
Rising crude prices, coupled with a strong import bill, are being passed on to the consumers by the oil marketing companies. Also, Prime Minister Narendra Modi has been appealing to the public as well as government agencies to save fuel, work from home and travel less whenever not necessary, aiming to curtail fuel consumption.
While the Centre has expressed concern about the spiralling energy import bill's strain on India's foreign exchange reserves and its impact on the widening current account deficit (CAD), analysts believe the demand for transportation fuel may be slowing.
A report by Elif Binichi, principal analyst at energy analytics firm Kpler, says that the refined fuel demand growth forecast for India in 2026 has been cut by 39 per cent. The revised forecast is now placed at roughly 78,000 barrels per day (kbpd) compared with the earlier forecast of 128kbpd.
The petrol demand, the report highlighted, is likely to be hit the most. The forecast growth for gasoline has been cut by about 63kbpd from 128kbpd, and estimates for petrol demand from 1,035kbpd to around 1,010kbpd.
Analysts said that the decline in mobility due to reduced work from office and discretionary travel and nationwide fuel conservation drives may bring down petrol consumption in the months to come. Diesel demand growth has also been lowered by almost 20kbpd.
ATF Demand Also Expected To Slow
Concerns over reduced air travel have also impacted aviation fuel projections. The growth estimate for aviation turbine fuel (ATF) demand has been cut by almost 50 per cent to six kbpd from the earlier estimate of 11 kbpd.
The report suggested that policymakers are currently focusing more on economic stability, inflation control, energy security and conserving foreign exchange rather than encouraging rapid fuel demand growth.
Experts warned that unless crude oil prices ease significantly, the rupee stabilises, or the government announces additional relief measures, further fuel price hikes and stricter austerity measures may become unavoidable.
Overseas Travel Spending Declines
Data also showed a slowdown in spending on overseas travel by Indians. Under the RBI’s Liberalised Remittance Scheme (LRS), expenditure on foreign travel declined to USD 1.09 billion in March, compared to USD 1.30 billion in February and USD 1.65 billion in January.
Overall outward remittances by Indians across categories stood at USD 2.59 billion in March, with travel expenses continuing to account for the largest share.
Under the LRS framework, resident Indians are allowed to remit up to USD 250,000 annually for permissible current and capital account transactions.