Sale of oil products during July-October 2008 declined by 5 percent, to 5.9 million tons. The sale of black oil (FO and LDO) stood at 2.6 million tons, whereas that of white oil (petrol, diesel, jet fuel and kerosene) stood at 3.3 million tons, down by 4 percent, and 6 percent, respectively.
"Oil products sales continued to post downward trend during July-October 2008 amid slowdown in overall economic activity in the country", Farhan Mahmood, an analyst at JS Global Capital, said. According to the figures released by oil companies advisory committee (OCAC), decline was visible in all oil products.
Besides overall economic meltdown, higher oil prices, liquidity crunch in the power sector and increase in penetration of smuggled Iranian diesel were major factors behind 4 percent and 5 percent decline in furnace oil (FO) and diesel (HSD) sales, which constitute 85 percent share in overall oil products sales.
Despite rising demand from household power generators, diesel sales recorded a 5 percent decline in its sales from 2.6 million tons to 2.4 million tons during July-October 2008. "Besides dragdown in overall economy, the penetration of smuggled Iranian diesel and higher domestic diesel prices also led to decline in demand for local diesel which is currently Rs 6-8 costlier than the smuggled one and despite expected decline in local diesel prices, we believe overall diesel sales is likely to come down by 2 percent by the end of FY09", he said.
While subsidy on diesel has been abolished, OMCs are still suffering from the piling up of the money with Wapda and IPPs (independent power producers) on furnace oil (FO). This was mainly due to mounting cash crunch in the power sector amid higher FO prices. With ongoing water shortage in the country and less availability of gas this winter, FO demand is likely to shoot up in upcoming months.
"However, with no major growth in industrial production likely in FY09, we have slightly revised downward our FO sales forecast from 8.1 million tons to 7.8 million tons in FY09, and we are now expecting a volumetric growth of 4 percent in FO during FY09 and believe that rising electricity demand in the country, lack of additional gas in the system and capacity constraints in hydro-power generation would jack up demand for FO during later months of FY09", he added.
Similarly, higher retail prices and higher CNG consumption led petrol (mogas) sales to drop by 11 percent during July-October 2008. "However, we could see demand to revert if petrol prices further come down by Rs 8-12 per litre owing to declining international oil prices", he said.
Moreover, aviation industry is also badly hurt by the slowdown in economy. Not only this, rupee depreciation has also increased cost of foreign travel which led to decline in air travelling. Thus, lowering jet fuel consumption (JP) by 4 percent.
With efficient fuel handling and being the largest oil marketing company, PSO''s market share rose to 71 percent during July-October 2008 from 70 percent in July-October 2007, while Shell was able to maintain its market share at 13 percent. Market share of APL declined to 5 percent from 6 percent during the period.
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