Nepal’s oil import bill this year has dropped by 4.35% compared to last year! Many may jump to the conclusion that it is due to transition to EVs. But that’s not the reason. 

The primary reason is the falling global oil prices. Even then, that means less import right? Yes, less imports just in monetary terms. While the total value of imports has decreased, the actual quantity of oil being imported has gone up. 

Let's dig deeper into what this means for Nepal's economy and energy landscape.

The Bigger Picture: Import Trends

Nepal’s trade environment has been turbulent, with the country's total trade value declining by 1.33% to Rs 1.74 trillion in the fiscal year 2023-2024. The drop in the oil import bill is part of a broader trend of declining import costs due to corrections in global oil prices, which have come down after the sharp spikes caused by geopolitical events like the Russia-Ukraine war​ 

Breakdown of Oil Imports

• Diesel: The import bill for diesel fell by 6.36%, totaling Rs 143.97 billion. However, the actual volume only decreased slightly by 2,946 kiloliters. This reflects stable demand despite price fluctuations.
• Petrol: The value of petrol imports dropped by Rs 1.25 billion to Rs 68.1 billion, but the quantity imported actually increased by 7,124 kiloliters. This highlights that demand remains strong despite higher costs​.
• LPG (Cooking Gas): LPG import costs fell by Rs 2.53 billion to Rs 55.61 billion, yet the volume increased by 9,863 tonnes, showing consistent demand for household energy needs​​.

Why the Drop in Import Costs?

The main reason for the decrease in the oil import bill is the stabilization of global oil prices after the highs seen in 2022. Brent crude oil prices, which peaked at $120 per barrel due to the Russia-Ukraine conflict, have since corrected and are now averaging around $83 per barrel​​.

Nepal's Energy Strategy

Despite these changes, Nepal's dependence on fossil fuels remains strong. The country has been working on becoming more energy self-sufficient by increasing electricity generation. Nepal’s electricity production has reached 3,060 MW, with 97.7% of the population now having access to electricity. Additionally, Nepal has started exporting surplus electricity to India, generating significant revenue​.

Economic Implications

• Trade Balance: The decrease in petroleum import value is positive for Nepal’s trade balance, reducing the outflow of foreign currency. However, it also highlights the ongoing reliance on fossil fuels despite rising adoption of electric vehicles (EVs).
• Energy Transition Challenges: While EV imports are rising, they haven't significantly reduced petrol consumption. The demand for combustion engine vehicles remains strong, underscoring the need for strategic policy changes to encourage a shift toward cleaner energy​​.

Nepal’s reduction in oil import bills may seem like a positive development, but it reveals deeper economic and energy challenges. The country must continue to invest in renewable energy infrastructure and policy innovations to move toward true energy self-sufficiency. This strategy is crucial for balancing economic growth with sustainable energy practices.

What do you think about Nepal's energy strategy? How can the country better balance between fossil fuels and renewable energy? Share your thoughts below!