When petroleum demand in a country that is also highly dependent on imports of the same starts shrinking, it is definitely a sign of tougher economic times; industrial and manufacturing activity is on a decline, and construction and infrastructure development come to a standstill.
Such are the days these days in Pakistan where demand for the petroleum product is clearly indicating how the economy is moving. Up until FY17, petroleum consumption in the country was growing and the pace really picked up after FY13 as rise in demand by the power sector, increased infrastructure and development activity, growing car sales and an overall increase in economic growth triggered volumetric sales by the oil marketing companies besides lower prices. CPEC was a major booster behind the growing OMCs sales as well as country’s petroleum imports as the first phase primarily consisted infrastructure activity.
However, this all slowed down as FY18 brought in not only a rebound in falling international crude oil prices but the economy also entered a standby mode during the election year. And now one year under the new government, structural changes, reforms, a new IMF Programme and massive currency depreciation have all slowed down economic activity - signs of which are glaringly visible in petroleum product consumption in the country. Moreover, as CPEC entered the second phase, development and infrastructure activity slowed down and government moved from a full-on furnace oil approach in power sector to other imported/indigenous fuels like RLNG and coal, which further dented demand of fuels like furnace oil and diesel. Growth is petrol consumption also softened as automobile sales started losing steam.
Parsing petroleum consumption by provinces does show little change as compared to overall country demand pattern as bulk of the consumption lies with Punjab. Province wise data from OCAC shows that the province accounts for over 60 percent of the total consumption of petroleum products that include furnace oil, high speed diesel, motor spirit, JP-1, Kerosene, etc. Product wise, its share petrol consumption has increased from around 60 percent in FY05 to over 66 percent in FY19. For HSD, Punjab accounted for 62 percent in FY19 versus 57 percent in FY05. Whereas FO’s declining trend can also be seen in Punjab’s share in the fuel consumption that hovered at 56 percent after FY05 and dropped to 49 percent in FY19.
Provincial data shows that petrol consumption has been steadily increasing in all provinces despite the recent slowdown in volumes, whereas furnace oil has taken a step back.
Diesel consumption that is largely linked to agricultural activity and transport that has also been waning has seen the same declining trend in Punjab and KPK. On the other hand, its consumption in Sindh and Balochistan has not been affected as much likely due to the availability of cheaper Iranian diesel smuggled from the Iranian border.
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