KARACHI: The demand for petroleum products has dropped significantly, suggesting an economic slowdown in the country.
Import of petroleum products including furnace oil, diesel, petrol and raw crude fell markedly in August, according to the Pakistan Bureau of Statistics (PBS).
Surprisingly, exports of refined petroleum products rose in the month, indicating domestic oil refineries were reluctant to build inventories for one reason or the other.
The statistics came following a number of developments including a sharp recovery in global crude oil prices and a major shift in the domestic market where car drivers switched from petrol to compressed natural gas (CNG).
Apart from these, the government’s less reliance on oil-based power plants and a flat growth in the large-scale manufacturing sector – cement, steel, fertiliser and auto industries – restricted the demand for petroleum products, experts said.
The drop in demand may also be partially attributed to a halt to business expansions, including those planned by foreign firms, before clarity emerges on the economic front as the Pakistan Tehreek-e-Insaf (PTI) government is currently reshaping policies.
According to the PBS, the import of petroleum products dropped 38% to 912,370 tons in August compared to 1.46 million tons in the corresponding month of previous year.
Import of crude oil fell 6% to 948,787 tons compared to 1 million tons in August 2017.
In terms of value, however, the import of all fuel products including liquefied natural gas (LNG) surged 26% to $1.37 billion, which amounted to over one-fourth of the total import bill of $4.99 billion in August.
The rise in import value came after a 60% recovery in the Brent crude oil price in the last one year, which stood at a four-year high of $80 per barrel in the world market on Friday.
On the other hand, exports of petroleum products (raw and refined) surged over six times to $58.45 million in August this year compared to a mere $9.07 million in August 2017.
The surge in exports from the country, which heavily relies on imported fuels, is not less than a surprise as it meets over 70% of needs through imported fuels.
In volumetric terms, exports of petroleum crude increased 100% to 46,936 tons, export of petroleum products rose four times to 23,468 tons and export of petroleum naphtha surged 51% to 24,295 tons in August on a year-on-year basis.
Experts including Economic Advisory Council member Dr Ashfaque Hasan Khan, Arif Habib Limited Head of Research Samiullah Tariq and Topline Securities’ analyst Umair Naseer agreed that the drop in imports hinted at economic slowdown in the country.
“The fall in imports (including those of petroleum products) indicates economic slowdown,” Khan said cautiously in comments to The Express Tribune the other day.
“A flat growth in large-scale manufacturing suggests a slowdown in the economy,” Naseer said.
The reasons behind the flat growth were 18% rupee depreciation and a 175-basis-point hike in the benchmark interest rate to 7.5% in the last nine months.
The previous PML-N government had set a GDP growth target of 6.2% for the current fiscal year. However, many brokerage houses have projected a growth rate of around 4.7-4.8%.
Naseer said the uptrend in global oil prices and domestic markets had convinced transporters to shift to CNG fuel. The situation brought down the demand for oil.
Refineries may have exported naphtha (a raw material of petrol) to remove inventories, which, at one point in the near past, were going to spill over and threatened to stop operations.