Is the growth of demand for gas stymied by substitution from liquid fuels such as naphtha and LDO?
8The answer could well be "yes", given the furious pace at which substitute petroleum liquids are growing this year even as gas consumption stagnates.
8Pertinently, the situation was just the reverse when crude prices were high: demand for naphtha, FO/LHSH and LDO were then on the decline while there was a sharp rise in the consumption of gas
8For the current analysis, a fair comparison of prices will have to be between the landed cost of LNG -- because shortage of domestic gas means that only LNG can be used in industrial furnaces -- with that of naphtha and other fuels.
8Low crude oil prices have brought about a concomitantly sharper fall in liquid fuel prices than in LNG.
8Consequently, the substitution effect has come into full play and adversely impacted the acceleration of incremental demand for gas in India that was noticed earlier.
8A glance at the latest consumption figures will show what is happening on the ground.
8Naphtha consumption had gone up by a whopping 39.68% in November, 2015 in relation the same month last year. April-November, consumption went up an unprecedented 22%.
8Similarly, consumption of LDO grew by 10% in November and 13% cumulatively.
8Clearly, low crude prices create a big substitution effect in a country like India and acts as an inhibitor to the growth in consumption of gas.
For more details visit indianpetroplus.com
8The answer could well be "yes", given the furious pace at which substitute petroleum liquids are growing this year even as gas consumption stagnates.
8Pertinently, the situation was just the reverse when crude prices were high: demand for naphtha, FO/LHSH and LDO were then on the decline while there was a sharp rise in the consumption of gas
8For the current analysis, a fair comparison of prices will have to be between the landed cost of LNG -- because shortage of domestic gas means that only LNG can be used in industrial furnaces -- with that of naphtha and other fuels.
8Low crude oil prices have brought about a concomitantly sharper fall in liquid fuel prices than in LNG.
8Consequently, the substitution effect has come into full play and adversely impacted the acceleration of incremental demand for gas in India that was noticed earlier.
8A glance at the latest consumption figures will show what is happening on the ground.
8Naphtha consumption had gone up by a whopping 39.68% in November, 2015 in relation the same month last year. April-November, consumption went up an unprecedented 22%.
8Similarly, consumption of LDO grew by 10% in November and 13% cumulatively.
8Clearly, low crude prices create a big substitution effect in a country like India and acts as an inhibitor to the growth in consumption of gas.
For more details visit indianpetroplus.com
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