Petroleum consumption to come down

Consumption of petroleum products is expected to decline, and FY23 is slated to be a year with slow volumetric growth year-on-year. The decline in volumes in 2023 is anticipated due to higher petroleum prices particularly of retail fuels and weakening economic activity amid rising inflation. Apart from this, the furnace oil sales that have been bee rising with increased consumption in the power sector are also expected to decline as demand falls amid falling aggregate demand. The unabated consumption of petroleum products had to be brought down to control inflation through the increase in prices, which has obvious repercussions for on the volumetric sales of the OMC sector.

With not so robust growth prospects of petrol consumption in FY23, the slowdown started in the last months of FY22. In June 22, petroleum sales by the oil marketing companies remained flat year-on-year, while witnessing a month-on-month decline of over 10 percent. Motor Spirit sales declined by 9.5 percent year-on-year, and 11.9 percent month-on-month in June-22 due to massive hike in petrol prices as well as fall in demand from higher inflation and lower activity including all transportation. High Speed Diesel sales in June-22 also declined by 8.1 percent year-on-year, and by 16.4 percent month-on-month again due to higher prices of diesel along with petrol and also weaker industrial and economic activity. Furnace oil sales in June-22 were slightly lower on a month-on-month basis, but the year-on-year growth in FO sales during the month was over 33 percent due to the unavailability of spot RLNG as well as the default on long-term contracts that shifted the entire burden to furnace oil.

However, overall in FY22, petroleum consumption mirrored by the sales of petroleum products was up by percent year-on-year. FO sales and HSD sales were up by over 35 and 15 percent year-on-year respectively in FY22 , whereas MS sales were up by 8.7 percent year-on-year due to higher economic activity post COVID era.