Asia’s Fuel Subsidies Not Enough To Support Oil Demand Growth

Asia’s Fuel Subsidies Not Enough To Support Oil Demand Growth

Fuel price increases will outpace Asian governments’ ability to offset them with subsidies, according to ESAI Energy’s recently published Asia Watch. India, Malaysia, and the Philippines have already boosted subsidies for gasoline and diesel and Indonesia could soon follow, with national elections coming in 2019. But weakening local currencies are exacerbating the effects of rising oil prices for consumers in many Asian countries. At the same time, trade tensions between China and the U.S. are eroding regional business confidence and threaten to drag on Asian economic growth next year.

Together, these factors will cause non-China Asian demand growth for gasoline, inland diesel, and jet fuel to decelerate from a combined 340,000 b/d this year to 300,000 b/d in 2019, when it will reach 18.4 million b/d.

India announced last week that it would cut gasoline and diesel prices by about 3 percent each, yet retail prices for the two fuels have already risen by 16 and 22 percent, respectively, since January. The rupee is 13 percent weaker now versus the dolla r that it was in January, making its crude oil imports of 4.6 million b/d more expensive. India is a net exporter of transportation fuels, but fuel importers in the region have also seen their currencies weaken substantially, including the Philippines, Indonesia, and Australia, putting pressure on gasoline, diesel, and jet fuel consumption there. Read more

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