KARACHI: Pakistan did not import high-speed diesel (HSD) in July, following a slowdown in domestic demand due to economic slowdown and smuggling from Iran, JEE News reported on Sunday, citing industry officials.
About 70% of the country’s diesel is used in the transport and agriculture sectors.
However, both sectors have been severely affected by the economic crisis and the high price of Pakistani diesel compared to cheap Iranian fuel.
During July last fiscal year, the country imported 162,000 tonnes of HSD.
“The economic slowdown has adversely affected operations in the transport sector, while consumption in the agriculture sector has also remained low,” said an industry official.
He added that the daily consumption of diesel through the legal channel has come down to 15,000 tonnes from 22,000 tonnes in the past.
Sources said Pakistan State Oil (PSO) – the country’s largest oil importer – postponed its planned HSD imports for July as local refineries had sufficient inventories to meet lower demand.
“If HSD was imported, the refineries would have to shut down as their diesel output is not used by the local transport sector,” said another source.
Sources said PSO was unlikely to import HSD in August or September, as the demand outlook remained bleak and the price differential with Iranian diesel widened.
Diesel smuggling from Iran mostly met the country’s HSD demand in the month under review, as high prices of Pakistani diesel pushed the transport sector towards cheaper Iranian diesel, officials said.
The government on August 15 raised the price of HSD by 7 percent to Rs 293.40 per litre, while Iranian diesel is selling at around Rs 200 per liter in border areas.
An industry official said diesel consumption through the legal channel has come down by a third.
“Refineries are already facing the problem of not picking up furnace oil, as power plants are also reluctant to use fuel oil for power generation.
As a result, furnace oil reserves have piled up in the country, and refineries have had to export some to continue operations,” the official said, adding that if diesel is imported in July, refineries will have to shut down. Will have, because their production will not be used by the local transport sector.
Pakistan’s oil sector also faces challenges from growing reserves of furnace oil, which power plants use to generate electricity. Power plants have been reluctant to use furnace oil because of the high cost, which has forced refineries to export some of their surplus stock.
Officials said that they do not see any improvement in diesel consumption in the coming days, as the increase in diesel prices will further boost the consumption of Iranian diesel in the country.
“It is very unlikely that PSO will import HSD in August or next month, given the current situation of diesel consumption from the legal channel,” said an official.
