The Petroleum Supply Especially In The North Is No Long At Normal Levels For The Past Week
The past week or so has seen a disruption in the normal levels of petroleum supply, particularly in the north. Although there are no imminent signs of fuel shortages in the short–term, with the country having stocks of 18 days of petrol consumption and 30 days of diesel consumption, plus more on the way, farmers in rural Punjab are still complaining of a diesel shortages while commuters are reporting rationing at petrol stations.
Before 15th February, suppliers are anticipating prices to drastically increase. In anticipation of a Rs30–50 per liter jump in prices, Oil Marketing Companies, agencies, dealers (petrol pump owners), consumers and others are stockpiling petroleum products for the potential capital gains.
The only way for the government to rid itself of this predicament is to raise all duties and taxes in one go and then declare that no more increases on the petroleum levy, GST or any other taxes linked to petroleum products will be implemented in the future. Otherwise, this shortages will continue until all the taxes are passed on.
The threat of sustained shortages is undeniable, and the country is dangerously close to an economic crisis. Even with the help of the IMF, it will take some time to normalize supply. The country must have a near zero current account balance for the next two to three years, and a debt restructuring process could take anywhere from six to eighteen months. During this time, the supply of petroleum products will remain low.
Also Read: Petroleum prices are expected to rise by up to 10%.
It is therefore advised that we should all take action to save money on our consumption. If we do not, this will be forced upon us. With inflation affecting purchasing power and a rise in petroleum costs, consumption will be impacted and no one will be exempt. Those who are better off should make the effort to alter their lifestyle voluntarily.
The Country Has Stocks Of 18 Days Of Petrol and 30 Days Diesel – Sources
Today, the situation is that the nation has an estimated 18 days worth of petrol (around 600 million liters) and 30 days of diesel (approximately 700 million liters). Bringing in new imports is dependent on a Letter of Credit being approved, which relies on dollar inflows. Since these conditions are unlikely to improve in the near future, imports must be reduced. This means that the consumption of petroleum must be restricted.
Approximately 30 percent of petrol and 70 percent of diesel are usually supplied by local refineries, with 20 percent of that supplied by locally produced crude. Additionally, a deferred oil facility at $100 million per month could supply an additional 20 percent of the crude needed for domestic refineries. However, not all petroleum products are imported.
If the economy were to suffer a major setback, such as a default, refineries would be able to operate at 40 percent of their capacity, providing 12–15 percent of petrol and 28–30 percent of diesel at current levels of consumption. This would require extreme rationing, and the black market would likely thrive. This would be an extremely difficult situation to manage.
Imported Crude For Refineries And Petroleum Products
It is possible that this will not occur. Imported crude for refineries and petroleum products for direct supply to OMCs could provide some supply, but not nearly enough to reach normal levels.
In the near future, it is essential to ensure an adequate supply of diesel, as the high–demand season for this fuel is just around the corner. The wheat sowing season begins in March and thus requires a greater supply of diesel. Shortages of this fuel could lead to a smaller crop of wheat in the coming months, as well as shortages of other goods across the nation due to disruptions in the supply chain.
The government needs to take action now and raise the price in order to address the current supply shortages. Unfortunately, it looks like this summer is going to be difficult no matter what.
