India’s transportation fuel demand growth is likely to slow considerably in the latter half of 2026 as government-backed fuel conservation initiatives, persistently high crude oil prices, and a weakening rupee begin to weigh on travel and consumption patterns, energy analysts have said.
Petrol and diesel prices have risen by nearly Rs 5 per litre each through three separate hikes since May 15, after oil marketing companies passed on part of the burden of soaring global crude prices to consumers. The increases coincided with Prime Minister Narendra Modi urging citizens and government departments to conserve fuel, promote remote working, and avoid unnecessary travel as elevated energy import costs strain foreign exchange reserves and risk widening the current account deficit.
Analysts believe the combination of higher fuel prices and conservation measures could significantly temper fuel demand growth.
A report by Kpler analyst Elif Binici revised downward India’s 2026 refined products demand growth estimate by about 77,000 barrels per day (kbd), or nearly 39 per cent, reducing the forecast to around 78 kbd from the earlier estimate of 128 kbd. The revision was mainly attributed to weaker projected growth in petrol and diesel consumption.
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Petrol demand is expected to face the sharpest slowdown, with growth now forecast to fall short by around 25 kbd — revised from 63 kbd to 38 kbd. Petrol consumption is currently estimated at 1,010 kbd, lower than the earlier forecast of 1,035 kbd, amid softer commuting trends, reduced discretionary travel, and intensified fuel-saving campaigns by the government.
Annual diesel demand growth projections were also lowered by roughly 20 kbd, while jet fuel demand growth estimates were nearly halved to around 6 kbd from 11 kbd earlier, reflecting expectations of reduced air travel and tighter household spending.
“The revisions primarily reflect weaker expected growth in gasoline and diesel demand as higher costs, softer mobility trends, and recent government-led fuel conservation efforts increasingly impact domestic transportation activity,” the report noted.
According to the analysis, India’s macroeconomic conditions have worsened since the escalation of the US-Iran conflict, with rising crude import bills, higher refinery costs, and rupee depreciation adding to inflationary pressure and squeezing state-run oil marketing companies.
The rupee has weakened by nearly 6 per cent since the conflict intensified and around 10 per cent over the past year.
Meanwhile, foreign exchange reserves are estimated to have declined by approximately 4.3 per cent since late February as authorities attempt to stabilise the currency, curb imported inflation, and prevent excessive volatility in domestic fuel prices.
Retail fuel prices, which had largely remained unchanged since 2022 despite elevated international crude prices, were finally raised by about Rs 5 per litre in three phases over the last 10 days. Even after the hikes, prices remain substantially below estimated breakeven levels for state-run retailers.
The current nationwide average petrol price of roughly Rs 103 per litre is still significantly lower than the estimated breakeven level of nearly Rs 125 per litre. Diesel prices, averaging around Rs 94 per litre, remain below estimated breakeven levels of Rs 115-120 per litre.
Before the latest round of price revisions, state-owned fuel retailers were reportedly incurring losses of nearly Rs 1,000 crore per day as high crude procurement costs and currency weakness continued to outpace retail price adjustments.
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