Mint Explainer | How India is emerging as the epicentre of global energy demand

Mint explains the factors behind the projected demand growth, trends in other major economies and its impact on the global energy market.

What is the projection for the global energy consumption?

IEA, in its latest outlook, has said oil consumption would continue to grow till 2050, reversing its previous projections of ‘peak oil’ backed by strong demand from petrochemicals, aviation and transport sectors.

Its assumptions are based on a stated policy scenario, wherein all the announced policy steps are adhered to and the current policy scenario, in which the current trend prevails.

Under both scenarios energy demand would continue to increase till 2050, but at different speeds, with emerging markets and developing economies driving the increase, led by India and Southeast Asia.

How is India expected to lead the demand growth going ahead?

India is already among the major consumers of oil and gas. It is currently the third-largest importer of crude oil, after the US and China.

According to data from the Petroleum Planning & Analysis Cell, India imported 243.2 million tonne of crude oil in FY25, 3.8% higher than 234.3 million tonnes in the corresponding period last year.

India’s petroleum product consumption has been touching new record highs in the past two financial years. In FY25, it touched a high of nearly 242 million tonne and is expected to reach a fresh record of 252.9 million tonne for FY26.

Going ahead, with prospects of continued growth in industries and transportation, India is expected to emerge as the driving force of global energy demand.

The IEA report said India’s annual increase in annual consumption till 2035 would be in the range of 3.0-3.6%.

Energy demand in India is being propelled by increasing economic activity, it said. “In the period to 2035, GDP grows on average by 6.1% each year in India, which is more than any other major country or region, and its GDP per capita is 75% higher in 2035 than today,” the report said.

IEA said India would add nearly 12,000 cars to its roads every day by 2035, and is expected to add over 250 million air conditioners to its homes over the next decade, leading to a growth in both oil and power.

Why does it matter for India?

An increase in demand would largely mean a rise in oil imports as India is an import-dependent country for both oil and gas.

“Domestic production of oil has somewhat declined in the past few years. So, global suppliers being the main source of energy, the import bill may increase further going ahead,” said Prashant Vasisht, senior vice president and co-group head, corporate ratings, Icra Ltd.

India’s crude oil import bill in FY25 was $137.2 billion compared to $133.4 billion in FY24.

What is the projection for energy demand in other major economies?

China, which has been among the top energy consumers globally amid a rapid economic growth over the past decade, is expected to see a peak and plateauing of its domestic demand going ahead. Its economic growth thus far has been energy-intensive.

However, IEA noted that output levels of established industries like steel and cement have peaked and continue to decline in its projections.

In the case of the US, the largest consumer and importer of energy globally, the multilateral body noted a change in trend post the Trump administration’s policy shift towards fossil fuels. Energy demand in the US is projected to rise by 0.5% per year to 2035, marking a return to growth after broadly stable demand over the past two decades.

Oil demand continues to slowly increase in the medium and plateaus in the long term, while coal may steadily decline to 2050.

How would the estimates of energy demand impact market dynamics?

Concerns of an oversupply have kept oil prices largely subdued in the past few months. This view of a longer-term demand sustenance and IEA’s reversal from its previous projections of oil demand peaking by 2030, may support prices.

The December contract of Brent on the Intercontinental Exchange was trading at $62.51 per barrel, lower by 0.3% from its previous close.

What happens to the global climate goals in the event of growing energy demand and consumption?

Although energy transition efforts are underway globally, they have slowed down in some major economies, including the US.

This, along with the growing near-term energy requirement, has led several other countries to slow down on their climate targets.

The IEA has said that the target to limit the increase in global temperatures to 1.5 degree celsius of pre-industrial levels by the year 2100 would not be achievable and the temperatures would overshoot the target.

The world is not on track to meet internationally agreed climate goals and is facing a challenging set of economic and geopolitical conditions, IEA said. Several key actions are necessary to put the world on an energy system pathway more closely aligned with internationally agreed climate goals, it added.