The galloping economy of Pakistan paid no heed to rise in domestic petroleum products (POL) prices during FY05. POL products consumption in the country grew by 10 percent during the outgoing fiscal year 2004-05. During first half of FY05, the industry witnessed a colossal rise in fuel oil demand as power producers switched from hydel to thermal power generation.
However, with the start of second half of the year, fuel oil sales plummeted, thanks to adequate water and gas supply. Nevertheless, the industry managed to register a 26 percent rise in fuel oil sales.
On the other hand, HSD sales gathered pace during the last few months where they grew by more than 10 percent Y-o-for June 2005. The underlying force was the commencement of harvesting season in the country. Moreover, the unprecedented growth in agricultural sector of the economy also trickled down to the growth in HSD demand.
Latest numbers show that white oil products demand was on steep rise. Demand for HSD, mogas and jet fuel jumped by over 10 percent in June 2005 against June 2004.
Ali Hussain, research analyst from Investcapital Securities, said that being a product with fairly inelastic demand, petrol was actually sold more during the month. With new routes and frequent flights, jet fuel demand also surged despite the fact that JP is a deregulated product and is priced in line with the price changes in international oil markets.
However, the demand for furnace oil dipped by 38 percent in June mainly because of the slump in demand from power producers. The industry, therefore, saw a 6 percent decline in the overall sales in June 2005.
The government finally resorted to passing on the hike in oil prices to end-consumers. There has been substantial reaction from public and the political parties in the opposition. For FY06, there are two main threats. First, a decline in demand of white oil products due to record high oil prices. Second, there is pressure for a revision in pricing formula, originally designed to ensure adequate returns to OMCs when oil prices were almost half of today''s prices.
Moreover, because of higher availability of water in new fiscal year, furnace oil consumption would go down as electricity producers would rely more on hydel generation.
INDUSTRY SALES PERFORMANCE:
=============================================== (thousand tons) FY05 FY04 percent Growth =============================================== F.O 4,555 3,629 26percent H.S.D 7,696 7,421 4percent M.S 1,329 1,257 6percent JP-1/Jet 920 795 16percent Kerosene 231 258 -11 percent L.D.O 160 190 -15 percent TOTAL* 14,892 13,548 10 percent ===============================================
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