Why is Nepal's Petroleum Imports Declining?

After years of steady growth, Nepal’s petroleum imports have been declining for the past three fiscal years. According to data from the Trade and Export Promotion Center, imports hit a record high of Rs 334.10 billion in fiscal year (FY) FY 2021/22, but have since fallen each year.

In FY 2024/25, petroleum imports dropped by 4.29 percent compared to the previous fiscal year, totaling Rs 287.65 billion. Petroleum products include petrol, diesel, aviation fuel, liquefied petroleum gas (LPG), and kerosene. The import value for all five categories fell during the review year. Officials note that the drop in spending on petroleum imports is partly due to falling oil prices in the international market.

Falling Prices in the Global Market

World Bank data shows that the average price of crude oil fell from USD 97.1 per barrel in 2022 to USD 83.6 per barrel in 2024. Prices had surged in 2022 following the outbreak of the Russia–Ukraine war, as Russia is one of the world’s major exporters of oil and natural gas.

In 2025, crude oil averaged USD 74.2 per barrel in the first quarter (January–March) and fell further to USD 65.9 per barrel in the second quarter (April–June).

Rise in Electric Vehicle Usage

Industry stakeholders say increased use of electric appliances, as well as the growing adoption of electric vehicles including two-and four-wheelers, has also contributed to the decline in imports of petroleum products. According to the Nepal Oil Corporation (NOC), while total imports have fallen, petrol and diesel imports have seen a slight increase.

NOC Executive Director Chandika Prasad Bhatt said that the expansion of electric vehicle use has helped reduce oil imports. He also noted that price differences between Nepal and India influence import volumes. “When prices are lower in Nepal, Indian customers from border areas cross over to refuel here, and when prices rise in Nepal, Nepali customers go to India. This has a small but noticeable impact,” he said.

Economist Sherjung Bahadur Chand believes the shift from petrol- and diesel-powered vehicles to electric ones in recent years has played a role in cutting petroleum imports. However, petrol and diesel vehicles still dominate Nepal’s roads. He also pointed out that the country’s sluggish economy in recent years has reduced market demand for petroleum products.

According to the National Statistics Office, Nepal’s economic growth rate was 1.98 percent in FY 2022/23, increased to 3.67 percent in FY 2023/24, and is estimated to have reached 4.61 percent in FY 2024/25.

Chand noted that large industries are now consuming more electricity instead of petroleum products, which has further reduced demand. “The decline in petroleum imports is a positive development. Money that would have gone abroad for imports can instead be invested in domestic economic activities and development projects,” he said.