Press Release: Asia’s Fuel Subsidies Not Enough to Support Oil Demand Growth

BOSTON, MA, October 12, 2018

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 dollar 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.

“Increasing subsidies will not fully offset higher fuel prices in most Asian countries in 2019, and the trade wars will not help Asian oil demand,” explains Amrit Naresh at ESAI Energy. “Any further push for subsidies risks adding to public budget deficits, which governments across South and Southeast Asia have tried for years to rein in. They will not be able to insulate consumers from further price rises, which we expect to translate to slower demand growth next year.”

Lindsay Meagher
Manager of Marketing & Communications
ESAI Energy
Office:  (781) 245-2036

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s