Heatwave in India: Demand for diesel decline in June

India’s diesel demand saw a significant decline in June due to extreme heat conditions that curtailed travel, according to preliminary data from state-owned firms. Traditionally, fuel sales surge during election periods, but this year, the trend has reversed, with month-on-month declines even after the general elections.

Diesel Demand Decline

In the first half of June, petrol sales from three state-owned firms, which control 90% of the market, remained steady at 1.42 million tonnes, nearly identical to the 1.41 million tonnes consumed in the same period last year. However, month-on-month consumption dropped by 4.6%.

Diesel sales decreased by 3.9% to 3.95 million tonnes from June 1-15 compared to the same period last year. This followed declines of 2.3% in April, 2.7% in March, and 1.1% in May. Despite the summer harvest season and increased air conditioning use due to the scorching heat, fuel consumption did not rise as expected.

In mid-March, petrol and diesel prices were reduced by Rs 2 per litre, ending a nearly two-year hiatus in rate revisions, which was anticipated to boost sales. Despite this, month-on-month petrol sales fell by 3.6% compared to the 1.47 million tonnes consumed from May 1-15. Diesel demand remained flat month-on-month at 3.54 million tonnes for the first half of May.

Diesel, accounting for almost 40% of India's petroleum product consumption, saw a 10.5% drop from June 1-15, 2022. It was, however, 14% higher compared to the same period in 2020. The transport sector, which consumes 70% of all diesel sales, and agriculture sectors using diesel for harvesters and tractors, were significantly affected.

Jet fuel (ATF) sales rose 2.3% year-on-year to 331,000 tonnes during the first half of June but were 4.5% lower month-on-month compared to early May. ATF demand exceeded pre-Covid levels by 10.1% over June 1-15, 2022, and by 6.1% compared to 2020.

Cooking gas (LPG) sales slightly increased by 0.1% year-on-year to 1.24 million tonnes for the same period in June 2024. However, LPG consumption was 0.9% lower than in June 2022 and 32% higher than in June 2020. Month-on-month, LPG demand fell by 5.2% from 1.3 million tonnes in early May.

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