LAHORE: The Institute for Policy Reforms has reported that the petrol crisis happened due to lack of coordination among a lot of ministries, departments and agencies performing different functions within the sector.
As per the report, Pakistan State Oil (PSO), the major importer of petroleum products, imports 66% of petrol while other oil marketing companies (OMCs) import 34% oil. It said that the PSO had serious financial problems because of non-payment for purchases of furnace oil largely by the power distribution companies (DISCOs) including GENCOs, HUBCO and KEPCO. The PSO’s circular debt risen to Rs222 billion by September 2014 and in December, a number of L/Cs of PSO had been dishonoured, the report said, adding that this had greatly restricted PSO’s ability to import all petroleum products.
Moreover, there had been some depletion in inventories of petrol with OMCs. These companies had carried inventories below the level of three weeks in order to minimise potential inventory losses of up to Rs7 billion at a time of falling prices, the report said.
The decline in supply of petrol had occurred at a time of a big increase in demand due to a number of factors. By the beginning of January, with the cumulative fall in price of 28%, demand increased in the range of 6% to 8%. Also the government announced the closure of CNG stations from mid-November for four months in Punjab.
This led to diversion of demand towards petrol. A first estimate was that the consequential increase in demand nationally for petrol was over 10%. Overall, the combined effect on demand of the fall in price and reduction in supply of CNG was 16%, the report claimed.
Therefore, with declining supply in the presence of a big increase in demand, it was inevitable that, sooner or later, a shortage would take place.
