Petroleum product demand rises 4%

The demand for petroleum oil products in Pakistan witnessed a significant upswing in August 2023, with a 4% increase to reach 1.41 million tonnes. This surge in demand is attributed to several factors, including the anticipation of price hikes in petrol and diesel, a genuine uptick in demand, and a resurgence of agricultural activities in the country.

Data compiled by local research houses revealed that oil sales had previously stood at 1.35 million tonnes in July 2023. This noteworthy increase in demand for petroleum products has drawn attention from various experts and analysts.

Speaking to the Express Tribune, Head of Research at Foundation Securities, Mohammad Awais Ashraf, shed light on the driving forces behind this demand surge. He stated, “The small growth in demand can be attributed partly to the expectation of rising fuel prices in the month under review. Businesses, industrialists, and agriculturalists seem to have stocked up on these products to mitigate the impact of potential price hikes.”

Indeed, the government had cumulatively raised petrol and diesel prices by 10% each in two instalments during August. This move was met with high anticipation, as international markets also witnessed an uptrend in petroleum product prices. Furthermore, import and export data indicate that economic activities improved significantly during the month of August, contributing to the increased demand for petroleum products.

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A remarkable 11% growth in diesel sales, compared to a 2% increase in petrol sales, suggests heightened transportation of goods from ports to factories and vice versa, as well as increased movement of agricultural produce from farms to markets. The agricultural sector played a pivotal role in this surge, as August is a crucial season for the cultivation of cash crops like rice, cotton, and sugarcane. These crops require heavy usage of diesel-powered tractors and machinery.

On a year-on-year basis, oil sales in August declined by 8%, dropping from 1.53 million tonnes in the same month of the previous year to the current 1.41 million tonnes. This decline can be primarily attributed to a significant 64% decrease in the demand for furnace oil, primarily used for electricity production. The government’s reduction in power production using furnace oil was an attempt to control the rising cost of electricity production and subsequent inflation in electricity bills.

Despite the overall yearly decline, the sale of diesel and petrol witnessed notable increases of 11% and 5%, respectively, in August when compared to the same month in the previous year.

Published in The Express Tribune, September 3^rd, 2023.

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