NEW DELHI: Even as long-term global oil demand is projected to decline due to alternative energy adoption and efficiency gains, India is expected to lead the global oil demand growth, as per S&P Global Commodity Insights.
The growth in demand will, however, increase the country’s import dependency, reinforcing the need for a diversified crude sourcing strategy amid inadequate domestic supplies.
US President Donald Trump’s sweeping tariffs on all trading partners have introduced significant economic uncertainty, potentially reducing global GDP growth from 2.8% in 2024 to 2.2% in 2025, the agency said. This, S&P forecasts, could cut oil demand growth from 1.2 million barrels per day to 0.8 million b/d in 2025, with the possibility of zero or negative growth in the second half of the year.
The global oil market has been facing heightened volatility due to a combination of geopolitical tensions, trade policy shifts, and supply-side dynamics.
“Demand from China and the US, is expected to be most affected, particularly for refined products like diesel and jet fuel. Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) raised output by 411,000 b/d for May–July 2025, triggering a 20% drop in Brent prices,” said Premasish Das, Executive Director for Oil Markets Research and Analysis, S&P Global Commodity Insights. “The increase, driven by frustration among compliant producers, may be offset if overproducers like Iraq, Russia, and Kazakhstan reduce their output,” he added.
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S&P now forecasts an average Brent price of $68/barrel for 2025, up from $63/barrel earlier, but expects a decline below $60/bbl by year-end due to strong supply growth.
Geopolitics is now central to trade forecasts and corporate strategy, noted Rahul Kapoor, Vice President and Global Head of Shipping Research, S&P Global Commodity Insights.
“Traditional supply chain models need to be reimagined to incorporate geopolitical risks, tariff regimes, and sanctions,” said Kapoor, adding that the uncertain policy environment is likely to delay global investments and slow capital flows.
He emphasised that global trade growth has plateaued, shifting focus to emerging economies. “India stands at a critical inflection point, with immense potential to capture a greater share of global trade,” he said.
The government set ambitious targets for renewable energy capacity, aiming to achieve 175 GW by 2022 and 450 GW by 2030, with the 2022 target not being met. The government has now revised its target for 2030, aiming to achieve a renewable energy capacity of 500 GW (including hydro).
“We believe this is achievable, but in our base case forecasts, the target date may shift to 2032 instead of 2030,” said Eduard Sala de Vedruna, Head of Research, Energy Transition, Sustainability and Services, S&P Global Commodity Insights.
Currently, the total installed renewable capacity in the country has crossed the 200 GW mark.
Despite the progress, the energy sector in India faces several challenges, including infrastructure constraints, the financial health of distribution companies, and regulatory hurdles. Additionally, there is a need for significant investment in grid modernisation and energy storage solutions to support the integration of renewable energy, according to experts.
“On the positive side, there are ample opportunities for growth and innovation. The government’s supportive policies, coupled with advancements in technology, are creating a conducive environment for private sector participation. The development of smart grids, electric vehicles, and energy-efficient technologies is an area with significant potential,” said Vedruna.
S&P anticipates the global demand for power to increase by more than 80% in the next 25 years, driven by economic growth, electrification, and emerging demand from new sectors like data centres.
Significant investment is required in both new generation capacity and grid infrastructure to meet that demand growth.
According to Jenny Yang, Global Head of Power and Renewables Research, S&P Global Commodity Insights, renewables and batteries are poised to dominate capacity additions, accounting for an impressive 96% of net additions between now and 2050.
In India, non-fossil fuel sources contributed to 47% of capacity and 24% of generation in 2024. By 2050, the agency projects these figures to rise to 77% and 66%, respectively. “Despite the massive build-out in renewables, conventional thermal power will still make up 16% of global capacity additions to 2050 to support system reliability,” Yang said.
Source: The Financial Express
