PTQ Q2 2022 Issue

Meeting future Indian gasoline market demands

The role Indian oil refiners can take inmeeting gasoline demandwith production of clean burning components

Edward Griffiths KBR

T he Indian transportation fuels market has traditionally been dominated by diesel, but recent changes to legislation and consumer preference are produc- ing a shift away from diesel and towards gasoline consumption. Since vehicle electrification is still in its infancy, gasoline demand seems set to rise considerably through the 2020s and beyond. While gasoline remains a key transportation fuel, its growth must be balanced with environmental considerations such as air quality and decarbonisation which will be supported by changes to gasoline specifications. This arti - cle addresses the role Indian oil refiners can take in meeting gasoline demand with production of clean burning components. Indian transportation fuels demand The Indian transportation fuels mar - ket has traditionally been dominated by diesel, accounting for some 74% of transportation fuels consumed in 2019 (see Figure 1 ). Consequently, Indian refineries have been config - ured and operated for maximum diesel production. However, legis- lative changes and environmental standards have driven consumer behaviour towards owning and operating gasoline vehicles. In the period from 2012 to 2014, the Government of India (GOI) gradually increased the price of diesel, until subsidies were fully removed in October 2014​. 2 The removal of the diesel subsidy nar- rowed the price differential between diesel and gasoline fuels, bringing the retail price of diesel to 80% of the gasoline price, up from 63% in 2011/12 (see Figure 2 ). This change








Period of subsidy removal




















% share gasoline

Figure 1 Indian transportation fuels consumption

Source: Petroleum Planning & Analysis Cell 1

in pricing policy corresponds to the beginning of a sustained uptick of gasoline consumption from 2012, as a percentage of transportation fuels, illustrated in Figure 1 . A second factor in the pivot towards gasoline is the transition to Bharat Stage 6 (BSVI) emis- sions standards, implemented in April 2020. The transition to BSVI emissions standards required the introduction of new diesel engine technologies, including diesel par- ticulate filters and selective catalytic reduction. The addition of these sys - tems and their associated electron- ics added significantly to the cost of diesel vehicles, making them less attractive to consumers. The impact of this change is greatest in smaller vehicles, where the relative cost of additional components is largest, and small gasoline vehicles offer a cost-effective alternative. Indeed, India’s leading car marker, Maruti

Suzuki, has exited the diesel car market altogether​. 3 The cumulative impact of these changes has led to a drop in the share of diesel car sales from nearly 50% in 2012/13 to only 19% in 2018/19.​ 4 In the same period, total passenger vehicle sales increased by 27%, from 2.7 million to 3.4 mil- lion 5,6 , implying that annual gaso- line vehicle sales grew by more than 100% in the same period. The effect of vehicle electrification is yet to be seen in the fuels market, with electric vehicles (EVs) account- ing less than 1% of new light vehicle sales in 2020 and predicted to reach only 8% penetration by 2030. 7 With the cost of lithium carbonate, used in car batteries, increasing eight-fold since the start of 2021​ 8 , the price of EVs is likely to remain prohibitive to mass adoption in the short to medium term, so the impact on gas- oline consumption will be muted.

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