KARACHI: The demand for petroleum products is expected to accelerate as the economy shows signs of recovery in the first quarter of the current fiscal year, a study by Pakistan Credit Rating Agency (PACRA) said.
The country's consumption of oil products decreased by 25.5 percent in the fiscal year 2022-23 due to the economic slowdown, as noted by PACRA in its latest study on the performance of oil marketing companies (OMCs).
The demand for POL products is primarily driven by the transport sector and the level of industrial activity in the country. Automotive sales across all segments declined due to supply chain disruptions caused by SBP-imposed import restrictions, which led to an increase in vehicle prices and consequently a decline in sales.
On the other hand, LSM also experienced a 10.3 percent dip during FY23. Total consumption of petroleum products during FY23 was recorded at 17.1 million tonnes against 23.1 million tonnes in the previous fiscal year, declining by 25.5 percent year-on-year.
Regarding the types of POL products, white oils accounted for 87 percent of the total POL products consumed, while black oils constituted 13 percent during FY23, compared to 81 percent and 19 percent, respectively, in the previous fiscal year.
The three major products, HSD, MOGAS, and RFO, cumulatively accounted for 94.0 percent of the total POL products consumption in the country during FY23.
However, MOGAS and HSD consumption declined by 74.6 percent and 8.1 percent year-on-year, respectively, in FY23, indicating a slowdown in demand and a concomitant dip in automotive sales.
Passenger car sales experienced a staggering year-on-year drop of 59 percent during FY23, while those for trucks and buses also declined by 41 percent year-on-year due to increasing prices of these vehicles.
RFO consumption declined primarily due to the government's decision to reduce its use as a fuel for power sector plants. During FY23, its consumption declined by 46.5 percent year-on-year to reach 2.3 million tonnes.
Pakistan relies heavily on imports to meet its demand for petroleum products. On average, 8.0 million tonnes of crude oil were imported into the country in the last five financial years. Crude imports constituted 70.0 percent of the total crude supply in the country during FY23.
Total crude oil imports in FY23 amounted to $4.9 billion against $5.6 billion in FY22, representing 7.0 percent of the country's total import bill.
The imported volume declined by 17.0 percent to 9.3 million tonnes against 7.9 million tonnes in FY22, while the value of crude imports declined by 12.5 percent year-on-year.
The decline in the value of imports in FY23 was mainly attributed to the import restrictions imposed by the SBP from May'22 to June'23. Additionally, even though the rupee depreciated by 39.0 percent in the fiscal year ending on June 30, 2023, the decline in import value outpaced the depreciation.
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