The past 5 months have seen the demand for petroleum products drop by percent year-on-year primarily due to higher pump prices, economic slowdown, and floods. Petroleum consumption in the country was down by 12 percent year-on-year on November 22 alone. Petrol sales (Motor Spirit) sales were down by three percent year-on-year on November 22, while diesel (HSD) and furnace oil sales were lower by 18 percent and 22 percent year-on-year. On a month-on-month basis, petroleum sales on November 22 were down by 7 percent.

Overall, OMC sales in 5MFY23 were down by 20 percent year-on-year –depicting a demand decline brought by weaker economic growth highlighted by falling LSM growth, auto sales, and agricultural growth. During the 5MFY23, furnace oil sales were down by 24 percent year-on-year; diesel sales fell by 26 percent, and petrol sales declined by 16 percent year-on-year. The onset of the winter season puts pressure on OMC sales as power consumption falls and there is a decline in power generation from furnace oil. The decline in diesel volumes sold was due to higher prices cutting demand and lower agricultural activity due to floods. Similarly, higher prices and inflationary pressures kept a lid on petrol consumption.

The decline in sales volumes can also be seen in the decline in petroleum product imports where imports make a significant portion of the overall consumption. Data up till October 22 shows that during the first four months of FY23, the decline in petroleum imports stood around 30 percent year-on-year.

Demand for petroleum products will likely remain weak in the near future due to inflationary pressures and overall economic slowdown. Weaker power generation in winter will further lower volumetric growth. And the imposition of GST on petroleum products will not do any good to already weak volumes.