Watching the development of India, there’s often an assumption the country will follow China’s path. For commodity exports, China “is not the only game in town,” Australia’s resources minister Josh Frydenberg said in a speech last month, citing forecasts of India’s burgeoning demand for power, steel, and coal.
Here’s one area where the two countries could scarcely be more different: oil.
You might not think it looking back on a decade in which Brent crude prices have risen above $120 a barrel three times and sunk below $40 twice, but China’s growth has had a comparatively muted effect on global oil markets. While the country now accounts for about half of the world’s aluminum, copper and steel production, its share of oil demand is a relatively modest 12 percent:
Geography accounts for much of the contrast. China isn’t just a big consumer of oil: Thanks to ample onshore and offshore reserves, it was the world’s fourth-biggest crude producer after the U.S., Saudi Arabia and Russia in 2014, according to BP. India looks a lot more like Japan, whose woefully inadequate oil reserves made it the world’s biggest energy importer for decades. India was the 20th-biggest oil producer in 2014, according to BP, and looks since to have slipped one further place back, behind the U.K. Domestic output has dropped about 14 percent since 2011, according to data from the Ministry of Petroleum.
Over that same 15-year period when China was adding a million barrels of daily output, India put on just 169,000.
Oil accounts for about a third of India’s imports and two-thirds of its budget deficit, equivalent to 9 percent of gross domestic product in 2013, according to PricewaterhouseCoopers. That’s a drag on the economy, and in the long term the situation is likely to worsen.
Trade in refined products will reduce the daily import demand to about 5.4 million barrels in 2030, according to the IEA, but that’s still equivalent to more than half of Saudi Arabia’s output. And it will continue to rise:
By 2040, the gap between demand and domestic production will hit 9.4 million barrels a day, about 50 percent bigger than China’s deficit in 2014.
With capital spending on new oilfields on hold thanks to depressed prices and a global glut that may not be cleared until 2021, that’s enough to give any oil executive sleepless nights.