Oil and petroleum consumption witnessed a sharp recovery in FY21 after a dip in pandemic hit FY20. This recovery is reflected in resurgence of petroleum sales by the downstream oil marketing segment, which in turn is a representation of improved economic and industrial activity.
The recent data from OCAC shows that overall petroleum sales by the OMCs in FY21 stood higher by 18 percent to 19.5 million tons as compared to 12 percent year-on-year decline in FY20. Surprisingly - or ironically – the growth in overall petroleum sales was led by growth witnessed in furnace oil rather than the retail fuels that have been the key drivers in the last couple of years since. Since FY18, there has been a furnace oil curtailment and phase out drive which seems to have taken a U-turn (see illustration) in FY21 with FO volumes increasing by 55 percent year-on-year – the highest YoY growth seen since at least FY13. In June particularly, FO volumes were up by almost 3x while HSD and MS were rather flat.
FY21 growth also highlights a recovery for the petroleum products that continued to witness a YoY decline in growth in FY19 and FY20. Retail fuels, which had been growing steadily since FY13 also slipped in FY19 and FY20; but witnessed a recovery in FY21. Petrol (MS) and diesel (HSD) sales in FY21 were up by 13 and 18 percent year-on-year, respectively. MS sales were actually the highest even seen in the country.
Now to the factors driving growth in the key petroleum products; the growth in FO in FY21 was due to rise in demand by the power sector as the hydel and RLNG generation remained subdued during the year where the recent closure of RLNG terminal for maintenance has hit power shortfall drastically. MS volumes have been driven by recovery seen after the initial COVID lockdowns and restriction, and rising car and vehicle sales. and the recovery seen in the economy post initial COVID-19 phase has spurred industrial and agriculture growth which drove HSD sales. Pakistan saw bumper crops this year, and also has been witnessing increased industrial output as seen from growing LSM and exports numbers. Also, the curb on smuggling has helped diesel volumes tremendously. Also, low prices played their role in lifting consumption.
Returning from COVID restriction have given quite a boost to petroleum consumption and it is expected that the trend will continue in the coming months especially with a pro-growth budget proposals finalized earlier last week.