The petroleum product sales by the oil marketing segment, which are also widely referred to as oil sales, lost their vigor in 2018. With December 2018 data in, overall petroleum volumes seem to be contracting, falling by over 20 percent year-on-year. The two key factors that have smeared growth figures are i) altering of the power-mix with phasing-out of furnace oil and ii) sluggish industrial activity.

In December alone, Oil sales fell 27 percent year-on-year. And while there has been a significant increase in furnace oil (FO) consumption on a month-on-month basis, the year-on-year decline in the black fuel continued. However, importantly, the increase in FO December sales is a sign of increased consumption by the power sector, which might continue to use the fuel in the coming months to bridge electricity demand. FO imports, however, have been halted with no volumes reported in December. That might improve the local product uplift from the refineries.

While product-wise sales for 2018 show that FO has been the culprit behind the slithering volumetric growth (down by over 50 percent year-on-year), the decline seems to have spilled to the retail fuels as well. For instance, diesel sales have been affected by smuggling from Iran as well as lower demand for inland transportation in recent months. Petrol sales, too, seem to have consolidated with increasing petrol and automobile prices.

The 1HFY19 picture is even worse for OMCs. Falling by 32 percent, 1HFY19 volumes offer a support to the claim that economic activity has slowed down drastically. FO has been down by 66 percent, while HSD and MS are down by 21 and 3 percent, respectively.

According to a research note by Optimus Capital Management, the market share of the largest player in the OMC sector, PSO, has witnessed a sharp fall from 54 percent in 1HFY18 to 40 percent in 1HFY19, whereas APL, Shell and Hascol have all seen an increase of three, two and one percent, respectively, in the period under review, thanks to shifting of fuel preferences.

The volumes are on a down cycle. As fiscal austerity beckons, the outlook for petroleum product sales is not robust as it was in the yesteryears. With tax revenues falling short of target, the sales tax on petroleum products have usually offered an easy access to increase revenue collection, particularly when product prices are reduced. The government has resorted to an increase in sales tax on petroleum products after it announced a decrease in prices just recently. No chance, then, of a major demand boost!