October saw the highest ever average petrol and HSD price in history. Many feared the demand would be checked as prices are higher by nearly 30 percent year-on-year. Nothing doing. October numbers for petrol remain close to the highest-ever billion-liter mark. HSD consumption at 0.9 billion liters is the highest since May 2018.

This has clearly defied history (see: Is petroleum consumption really growing? published November 2, 2021). A 26 percent year-on-year increase in HSD consumption during Jul-Oct despite 17 percent increase in average retail price is by no means a usual occurrence. Rs229 billion spent on petrol and HSD consumption in October 2021 is 35 percent clear year-on-year. The 4MFY22 combined expenditure at Rs851 billion is also 35 percent more than the same period last year.

It will always be difficult to put a number on smuggling incidence, but every month that passes with high consumption despite high prices, reassures that smuggling curbs have been put well in place. The base seems to have changed, and the real growth in demand would be difficult to know. While taxes and levy may be at an all-time low, it would have been much worse had smuggling incidence been the same as yesteryears.

Among other fuel types, furnace oil registered the highest growth at 32 percent year-on-year, which is easier to understand. Recall that Pakistan has faced periods of gas shortage, both local and imported LNG. Couple that with the reduced water level in the dams leading to lower hydel electricity generation, and record high LNG prices, making furnace oil-based power generation more viable in some cases.As Pakistan now moves into the business end of winter season, expect more furnace oil to be utilized for power generation, even though electricity demand dips significantly during November-February. The recent cancellation of LNG cargoes by long-term suppliers, and no-show of spot suppliers for November and December – furnace oil is likely to keep going strong till the end of calendar year 2021.