Oil Demand Growth in non-OECD Asia: Drivers and Constraints
There has been a major shift in the structure and sources of global gasoline demand growth over the last few years. Whilst expectations were for gasoline demand to decline as demand was mainly driven by West of Suez markets while East of Suez demand was distillate heavy, gasoline growth is now being driven by non-OECD economies in Asia. Asian gasoline demand, which was growing at an average of 130 kb/d between 2005 and 2010, rose by nearly double to 290 kb/d from 2011 onwards. In this paper, we analyse the drivers and constraints of gasoline demand growth in non-OECD Asia in three parts. First, following Sen and Sen (2016) and Dargay and Gately (2007), we postulate that gasoline demand growth has been driven by a) a rise in per capita oil consumption, partly attributable to the drop in global oil prices; b) a move towards ‘motorisation’ with many Asian economies entering a stage of per capita income associated with higher levels of vehicle ownership; and c) a push towards growth (the expansion of GDP) via the building of infrastructure. We empiricise this hypothesis for a selected panel dataset of non-OECD Asian economies. Second, we discuss these associations in greater detail by looking at gasoline demand and infrastructure data for Asia, and further focusing particularly on three non-OECD Asian economies, including India and China, and potentially Vietnam. And third, we discuss the constraint on future gasoline demand from environmental policy and climate change. We draw some broad conclusions on the outlook for gasoline demand growth in Asia.