Diesel Demand Falls In July But Petrol Consumption Ticks Up
Demand for diesel saw a deeper year-on-year contraction in July.
Signs of an economic recovery in May and June have been followed by mixed signals in July. While some high-frequency indicators contracted at a slower pace, some showed signs of a double-dip amid the continued spread of Covid-19.
Demand for petroleum products continued to rise after hitting a record low in April. Demand for petrol in July was down 10.3% year-on-year compared with a 13.6% decline in June, according to data from the petroleum planning and analysis cell.
However, demand for diesel contracted at a sharper pace of 19.25% in July, compared with a contraction of 15.4% in June.
While petrol is largely consumed as fuel for two-wheelers, three-wheelers and cars, diesel is used in commercial vehicles, agriculture and industry, making it a strong indicator of economic conditions.
Despite the central government’s relaxations allowing industrial activity to resume, localised lockdowns have hampered economic activity and, in turn, the demand for diesel, said Urvisha Jagasheth, research analyst at CARE Ratings. The monsoon season and higher diesel prices have also contributed to the sequential deceleration seen in diesel consumption, she said.
Prices of diesel and petrol continued to shoot up in July, even amid muted demand. The retail price of diesel rose up to Rs 81.94 a litre in July in the National Capital Region, before it fell to Rs 73.56 per litre in August. The fall in price came after the local government cut VAT in a bid to propel the local economy.
Petrol prices remained at the highest since October 2018 at Rs 80.43 per litre.
