It’s time to take note of rising fuel consumption in the country. According to OCAC data, the petroleum product sales by the oil marketing companies in September 2017 show a sign of slowdown, which is largely due to the nearing of the end of the summer season.
While the month-on-month growth in September volumes was tepid – down by 15, 16 and 5 percent for major products: furnace oil, diesels and petrol - overall aggregate volumes were up by around three percent, year-on-year in Sep17, and by around nine percent in 1QFY18.
Growth in volumes sold was primarily led by retail fuels like diesel and petrol – a trend that the country’s petroleum consumption has seen in the last couple of years amid lower international oil prices, increased focus on infrastructure and transport in CPEC –related activities, and exacerbated growth in automobile sales. Sales of both the retail fuels – petrol and high speed diesel were up by 17 and 22 percent year-on-year in 1QFY18; whereas the black fuel segment – furnace oil witnessed a decline of around eight percent, year-on-year in the same period.
Why is it time to look at the rising fuel demand? Because Pakistan imports majority of its petroleum products. In reality, the growth in petroleum demand has offset the gains of low world oil prices to the economy. The government pricing strategy is in part responsible for the increase in retail fuel consumption, especially the motor gasoline (petrol) usage.
Ideally, the slip in crude oil prices from $120 to as low as $30 a barrel in the last four years should have resulted in a significant cut in the country’s import bill. But increase in petrol consumption continued to fuel imports with no long term appeasement to the current account deficit.
Even now, the petroleum prices in the country are much lower than similar oil importing countries. It’s high time that the government adopts a strategy that discourages rampant consumption of petroleum products to curtail the import bill. The petroleum group constitutes over 20 percent of imports and any cut in this head would be meaningful.
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