The recent launch of electric vehicles (EVs) at the Geneva Motor Show made the world realise that EVs are a reality and that excitement for this space is galore.

Lubricants or lubes are one of the most profitable areas in the oil and gas product slate. But will continuous thrust on EVs and city gas distribution, pose a threat for the demand for such products?

A recent Mckinsey report suggested that while volume growth for such products may flatten in the coming years, there is still some room for value expansion.

Growth will also be subject to certain risks and investors should pay heed to developments in areas of technology and science. They also expect road transport demand to decline in the next five years as the share of electric vehicles would increase and car-pooling will be the new cool.

Demand for sectors like marine, aviation and railway is less significant and this will continue to grow. Non-transport and industrial consumption should also keep growing steadily.

The report also suggested that while margins will rise significantly in small industrial sectors, such as fast moving consumer goods and chemicals, it will stagnate in sectors like transport equipment and metal works (these account for 30 percent of total global pool value)

Not only EV space, the continued focus on gas consumption as cleaner fuel is also expected to impact the growth in the lubricant space.

Gas consumption increased 8 percent year-on-year (YoY) in India for the month of January 2019. The oil products demand growth in India for the month of January 2019 came in at 6.4 percent, which is an improvement on a month-over-month (MoM0 basis but is still below the peak levels of 10 percent growth.

The gas demand in China is expected to increase, in fact, expected to more than double by 2035, largely driven by air- quality policies.

As per the World Health Organization (WHO), India is home to 14 of 20 most polluted cities globally. Transportation accounts for 11 percent of all carbon emissions in India and is among chief contributors to worsening air quality.

Additionally, the existing fleet of 90 lakh pre BSE I vehicles are major pollutants. In the near term, ride-sharing services and incremental acceptance of EV and gas-based fuels would in combination act as a practical solution towards change.

First Published:Mar 7, 2019 7:16 PM IST