Petrol shortage may last till Saturday
Surging demand, refinery shutdown, low inventories resulted in severe supply crunch.
In Punjab, petrol pump owners have been keeping far less than the legally required 20 days’ worth of fuel in their inventories as they expect prices to drop further, resulting in a particularly fragile supply chain. PHOTO: INP
ISLAMABAD/LAHORE/KARACHI:
When it comes to the energy crisis, Punjab just cannot catch a break. A cascading series of events over the last few weeks have resulted in a severe shortage of petrol in the province, as well as Khyber-Pakhtunkhwa, over the last three days, resulting in stranded commuters and a sharp slowdown in economic activity. Government officials believe the situation will be resolved by Saturday.
The sequence of events that resulted in this acute shortage seemed to be a perfect vortex of bad luck for consumers. They include the global drop in oil prices, surging domestic demand, high tide at Karachi Port preventing ships from unloading fuel imports, a truck crash outside Karachi, an unplanned shutdown at the country’s largest refinery, and the government-owned Pakistan State Oil running out of money.
The supply disruptions only appear to be affecting Punjab and Khyber-Pakhtunkhwa. Sindh and Balochistan are not affected, according to Aftab Hussain, chairman of the Oil Companies Advisory Council (OCAC), a lobbying group.
The sharp drop in global oil prices has resulted in a 27% drop in petrol prices in Pakistan so far, resulting in a sharp uptick in demand. “Petrol sales have touched 15,000 tons a day from around 11,000 tons a few months back. No one was anticipating this shift in demand so fast,” said a petroleum ministry official. The main cause: drivers who normally use compressed natural gas (CNG) for fuel shifting to petrol.
Meanwhile, an oil tanker carrying 52,000 tons of petrol for PSO has been awaiting berth at Karachi Port. “It should have started discharging the cargo by Thursday but has been delayed due to high tide,” said the official. Hopefully, the situation will improve by Saturday.”
A second vessel is also expected to reach Karachi Port on Saturday, according to OCAC’s Hussain.
An unplanned shutdown of Pak Arab Refinery (Parco), the largest producer of refined petroleum products, for a few days due to power failure compounded the shortage. And a deadly accident involving an oil tanker in which 62 people were killed right outside Karachi has also caused delays in shipment of petroleum products. “Drivers are very scared. They no longer want to take risk with all the spotlight on fitness of tankers and conduct of drivers,” the official said.
In Punjab, petrol pump owners have been keeping far less than the legally required 20 days’ worth of fuel in their inventories as they expect prices to drop further, resulting in a particularly fragile supply chain. “If supply is disrupted for even a single day, the pumps cannot cope with demand,” said Khawaja Atif, spokesperson for the Pakistan Petroleum Dealers Association (PPDA), an industry association.
“Currently only 10% of petrol pumps in Lahore are selling fuel. The others are dry,” said Atif. “There are only shortages of petrol. Diesel supply has not been affected by this crisis.” He also said that the situation in Punjab may take till Monday to resolve.
The situation in Punjab is particularly bad because, unlike Sindh, there is no supply of CNG during the winter months, meaning that commuters have no choice but to use petrol. In addition, people rely on backup generators during power outages, but the fuel shortage means that even those do not function.
Pakistan relies on domestic refineries for approximately 40% of total consumption. The remainder is imported as refined fuel. Disruptions in the international supply chain have been made worse by PSO, which has a 65% share in the Pakistani oil market, defaulting on its debts to global oil supplies, largely due to the inter-corporate circular debt that has financially crippled the energy sector.
The government has announced that it has released Rs17 billion, out of the hundreds of billions owed by state-owned power companies, to PSO to help resolve its financial crunch. PSO currently stands in default of Rs110 billion in letters of credit to its international suppliers.
These ad hoc measures by the government may not be enough to unclog the energy supply chain. More than petrol, officials are worried about dwindling stock of furnace oil, which fuel the fragile power system. “PSO has consumed its entire stock and the power plants are using whatever little is left with them,” said the petroleum ministry official.
“For now we are managing bit by bit, but after week or two the country will be completely dry in all products,” said one PSO official.
“None of the ministers are ready to confront the reality. Everyone wants to be the person to tell the Prime Minister that everything is okay. But in fact things are not okay. We will be facing blackouts within the next few days,” said the petroleum ministry official.
Published in The Express Tribune, January 16th, 2015.
When it comes to the energy crisis, Punjab just cannot catch a break. A cascading series of events over the last few weeks have resulted in a severe shortage of petrol in the province, as well as Khyber-Pakhtunkhwa, over the last three days, resulting in stranded commuters and a sharp slowdown in economic activity. Government officials believe the situation will be resolved by Saturday.
The sequence of events that resulted in this acute shortage seemed to be a perfect vortex of bad luck for consumers. They include the global drop in oil prices, surging domestic demand, high tide at Karachi Port preventing ships from unloading fuel imports, a truck crash outside Karachi, an unplanned shutdown at the country’s largest refinery, and the government-owned Pakistan State Oil running out of money.
The supply disruptions only appear to be affecting Punjab and Khyber-Pakhtunkhwa. Sindh and Balochistan are not affected, according to Aftab Hussain, chairman of the Oil Companies Advisory Council (OCAC), a lobbying group.
The sharp drop in global oil prices has resulted in a 27% drop in petrol prices in Pakistan so far, resulting in a sharp uptick in demand. “Petrol sales have touched 15,000 tons a day from around 11,000 tons a few months back. No one was anticipating this shift in demand so fast,” said a petroleum ministry official. The main cause: drivers who normally use compressed natural gas (CNG) for fuel shifting to petrol.
Meanwhile, an oil tanker carrying 52,000 tons of petrol for PSO has been awaiting berth at Karachi Port. “It should have started discharging the cargo by Thursday but has been delayed due to high tide,” said the official. Hopefully, the situation will improve by Saturday.”
A second vessel is also expected to reach Karachi Port on Saturday, according to OCAC’s Hussain.
An unplanned shutdown of Pak Arab Refinery (Parco), the largest producer of refined petroleum products, for a few days due to power failure compounded the shortage. And a deadly accident involving an oil tanker in which 62 people were killed right outside Karachi has also caused delays in shipment of petroleum products. “Drivers are very scared. They no longer want to take risk with all the spotlight on fitness of tankers and conduct of drivers,” the official said.
In Punjab, petrol pump owners have been keeping far less than the legally required 20 days’ worth of fuel in their inventories as they expect prices to drop further, resulting in a particularly fragile supply chain. “If supply is disrupted for even a single day, the pumps cannot cope with demand,” said Khawaja Atif, spokesperson for the Pakistan Petroleum Dealers Association (PPDA), an industry association.
“Currently only 10% of petrol pumps in Lahore are selling fuel. The others are dry,” said Atif. “There are only shortages of petrol. Diesel supply has not been affected by this crisis.” He also said that the situation in Punjab may take till Monday to resolve.
The situation in Punjab is particularly bad because, unlike Sindh, there is no supply of CNG during the winter months, meaning that commuters have no choice but to use petrol. In addition, people rely on backup generators during power outages, but the fuel shortage means that even those do not function.
Pakistan relies on domestic refineries for approximately 40% of total consumption. The remainder is imported as refined fuel. Disruptions in the international supply chain have been made worse by PSO, which has a 65% share in the Pakistani oil market, defaulting on its debts to global oil supplies, largely due to the inter-corporate circular debt that has financially crippled the energy sector.
The government has announced that it has released Rs17 billion, out of the hundreds of billions owed by state-owned power companies, to PSO to help resolve its financial crunch. PSO currently stands in default of Rs110 billion in letters of credit to its international suppliers.
These ad hoc measures by the government may not be enough to unclog the energy supply chain. More than petrol, officials are worried about dwindling stock of furnace oil, which fuel the fragile power system. “PSO has consumed its entire stock and the power plants are using whatever little is left with them,” said the petroleum ministry official.
“For now we are managing bit by bit, but after week or two the country will be completely dry in all products,” said one PSO official.
“None of the ministers are ready to confront the reality. Everyone wants to be the person to tell the Prime Minister that everything is okay. But in fact things are not okay. We will be facing blackouts within the next few days,” said the petroleum ministry official.
Published in The Express Tribune, January 16th, 2015.