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The petrol shortage in June and its link to pricing is known to all. But the mystery is why petrol sales are at their monthly highest in June. The country was in lockdown; the product was in short supply; yet the sales were at their peak. There is something fishy somewhere.

Petrol consumption in June stood at 725K tons which is the highest monthly sales in the country ever. The kneejerk reaction is that the product was hoarded by OMCs and dealers in June to sell at a high price in July – the prices moved up by 35 percent in July and the ex-refinery price is up by 93 percent. One cannot deny this presumption and some kind of inquiry or audit is required to approve this assertion.

But there are other factors at play too. The sales were up in May as well; after recording a dip in April. Fall in April (36 percent YoY) made sense as the country was in lockdown and the consumption was low. However, a sudden jump in May was counterintuitive. Sales were 635K tons in May – up by 5 percent from same period last year. And the number reached an all-time high in June – up by 28 percent YoY.

Certainly, there was no incentive for hoarding in May, and the demand was suppressed. There is something more to the story. One theory doing rounds for a long time is that petrol and diesel is being smuggled from the borders of Afghanistan and Iran and sold domestically. Nobody knows the number, but there is enough evidence to say that smuggling happens. Now with borders closed (or toughened) due to COVID, the smuggling avenues have dried up and the consumption onus falls on the formal market.

But the consumption is up by 14 percent in June from an already high base in May. There are other factors (other than smuggling) to explain higher sales in June. The problem compounded when the product was in short supply in most parts of the country till the prices were revised up in the last week of June. One explanation could be replacement of CNG consumption by petrol. Since CNG data is not published on monthly basis, there is no way to confirm this hypothesis.

Some argue that the intercity consumption has grown in the lockdown period. Public transport is far and few. People prefer to use private transport to travel in days of COVID. Even courier companies are transporting through road network. The data of intercity travel is not available on Google Mobility and highway authorities do not publish travel data. Hence, it’s an unknown as well. But this cannot explain such a high consumption as google mobility data shows that intra-city travel has for sure declined in the lockdown period.

There is surely something not explained by data. There may be some elements of hoarding as the incentive existed. Hoard the petrol and have huge inventory gain once the prices are revised up in June. This can only be known by doing some forensic audit.


Comments are closed.

Adnan tariq Jul 03, 2020 02:38pm
The simplest explanation is that media hyped the situation..I live in part of lahore..where a couple of petrol pumps of shell were was pretty lines nothing of that sort..
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