From the lows of 0.24 million tons of furnace oil (FO) sales in February 2018, to the highs of 0.86 million tons in May 2018 – the FO sales ride has been bumpy. But the rise in summer temperature has surely put on hold the supposed ban on furnace oil based power generation. Recall that FO sales in the five months from November 2017 to April 2018 had averaged 0.37 million tons, as the power demand was low and gas was doing the trick.
But the latest electricity generation numbers show that the reliance on FO is far from over – in fact FO based power generation had a share of 20 percent in total power generation in May 2018, up from an average 10 percent in the winters. As a result, FO sales have jumped again after a dull period – and the year-on-year decrease in FO sales has been reduced to only 10 percent, which was earlier seen going down by nearly 15 percent year-on-year.
What have also augmented the reliance on FO based generation are the worryingly low water levels in the reservoirs – which is evident in record low hydel based power generation. Eventually, FO would be phased out, but the journey would be slower than earlier anticipated, and it could take the entire FY19 before Pakistan moves out of FO.
On the other hand, petrol (MS) and diesel (HDS) sales remained strong – showing little signs of receding, despite a visible price increase. MS sales have recorded a 10 percent year-on-year increase. The price elasticity of petrol would be soon put to test as retail prices have reached a four-year high. But a robust increase in wheels on the roads suggests the absolute demand would struggle to be controlled, even at higher prices. This could add to more worries for an already worrisome import picture.
HSD sales have been growing modestly, recording 6 percent year-on-year growth. The slightly low sales in June 2018 are at the back of a higher base in April 2018. HSD prices have skyrocketed in the past three months and may see stifled demand in the coming months.
Seeing the robust automobile sector an infrastructure growth, and the hike in power demand coupled with low hydel based power generation – it increasingly appears that petroleum sales will remain on the higher side. That leaves the authorities with some work to do on the trade deficit front.
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