Diesel demand surges ahead of expected price hike

KARACHI: The demand for petroleum products, particularly high-speed diesel (HSD), has surged significantly in recent days, driven by expectations of a price increase in the upcoming fortnightly review.

According to insiders in the oil sector, the rise in HSD demand is unexpected, as there was no significant increase in demand from the industrial or agricultural sectors. “The surge is primarily due to dealers hoarding petroleum products, especially HSD, in anticipation of a price hike,” they explained.

The price of HSD is expected to increase by more than Rs10 per litre in the next price review, following a spike in global oil prices. Petrol prices may also rise by Rs3-4 per litre, according to estimates from the oil sector.

Industry experts noted that the average daily sale of HSD has jumped to 24,000 litres, compared to the usual 16,000-17,000 litres per day. They dismissed claims that the government’s crackdown on smuggling has contributed to the increase in legal HSD sales. “It is mainly hoarding by oil marketing companies (OMCs) and dealers aiming to maximize profits before the expected price hike,” they said.

A top official at a refinery confirmed the recent surge in HSD sales. “We are selling more HSD than usual, but we’re unsure if this is due to hoarding by oil marketing companies or dealers ahead of the price increase,” the official said. He added that the true demand for HSD will become clear after the price review, which will show whether the increased sales are driven by genuine demand or hoarding.

In recent months, the country has faced an oversupply of diesel due to low consumption. HSD demand has dropped from 750,000 tonnes per month to just 500,000 tonnes, driven by several factors, including smuggling. “With reduced demand, local refineries can easily meet about 80 per cent of the country’s needs,” the Oil Companies Advisory Council (OCAC) wrote in a letter to the government a while back.

The letter opposed the government’s decision to allow a private oil marketing company to import HSD. “There is no justification for importing excessive HSD, yet imports were allowed in recent months, leading to a serious glut and operational challenges for local refineries,” the OCAC had said.