COVID to shave-off 20-25% of auto fuel demand in April

New Delhi, May 06 (PTI): India’s second wave of coronavirus infections and the resultant city and state-specific restrictions may shave-off about 20-25 per cent of auto fuel demand in April, consultancy Wood Mackenzie said on Thursday and estimated a modest impact on oil demand in the absence of a full nationwide lockdown.
India’s COVID crisis shows no sign of slowing. The country has reported new cases above 3 lakh per day for two weeks straight, though experts think the true number is likely to be far higher, it said. “Yet despite increasing calls for the government to impose a nationwide lockdown to reduce the rate of infection, Prime Minister Narendra Modi has so far resisted, citing the economic impact on an already suffering population.”
Compounding this terrible human tragedy, the crisis is also impacting India’s near-term economic performance as travel is curtailed and local restrictions enforced.
“This is inevitably impacting the country’s energy markets, with all sectors being impacted. However, without a nationwide lockdown along the lines of that seen in Q2 (April-June) 2020, energy demand has so far proven relatively resilient, despite the more severe levels of infection compared to 12 months ago,” Wood Mackenzie said in a report.
It trimmed India’s GDP forecast to 9 per cent year-on-year in 2021 from 9.9 per cent previously due to the second peak of COVID cases. But there is further downside risk if lockdown measures and restrictions on movement are tightened further.
“While current localised restrictions appear inadequate in comparison to the severity of the pandemic, tighter restrictions come with expectations of additional financial support from the government; India’s stimulus measures have been modest since the start of the pandemic, totalling 9 per cent of GDP. If a nationwide lockdown is enforced, the government will need to provide much more,” it said.
With the domestic economy gripped by the pandemic and the looming risk of a nationwide lockdown, external demand and export-orientated industries are now critical for the economic recovery in the short term.
During last year’s lockdown, India’s oil demand fell by 1.2 million barrels per day in April-June, equal to about a 25 per cent drop. Road traffic was particularly impacted, recording a peak decline of some 45 per cent during April 2020.
Oil product consumption almost halved in April 2020 with petrol demand slumping by a record 60.5 per cent and diesel by 55.6 per cent.
“We’ve not seen anything this severe yet in the current crisis. And while many states and territories have implemented restrictions in movement, without a full nationwide lockdown, we expect the impact on oil demand to be more modest: road traffic oil demand in April 2021 is estimated to be down by about 20-25 per cent,” the report said.
Ironically, it is the scale of the current crisis that is offering some support to oil demand.