In response to a drop in demand within Pakistan due to an economic slowdown and smuggling from Iran, the country opted not to import high-speed diesel (HSD) in July.
Around 70 per cent of Pakistan’s diesel is consumed by its transport and agriculture sectors. However, these sectors have been severely affected by the economic crisis and the fact that Pakistani diesel is more expensive compared to the cheaper Iranian fuel.
In the same period the previous year, Pakistan imported 162,000 metric tonnes of HSD. An industry expert stated, “The economic slowdown has greatly affected the transport sector’s operations, and even the agricultural sector’s diesel consumption has been low.” He also noted that daily diesel consumption through legal channels had dropped from 22,000 metric tonnes to 15,000 metric tonnes.
Pakistan State Oil (PSO), the largest oil importer, postponed its planned HSD imports for July because local refineries had enough stock to meet the reduced demand. Another source explained, “If HSD had been imported, refineries would have had to stop operations as the local transport sector wouldn’t have been able to absorb their diesel output.”
According to Geo, it is expected that PSO will not import HSD in August or September either, given the dim demand outlook and the growing price difference compared to Iranian diesel. Notably, Iranian diesel, which costs around Rs200 per litre in border areas, has become a viable alternative, meeting much of the demand in Pakistan.
In response to an increase in diesel prices by 7 per cent to Rs293.40 per litre on August 15, the consumption of diesel through legal channels has decreased by approximately a third, according to an industry official.
Given the ongoing circumstances, officials do not anticipate an improvement in diesel consumption patterns. The expected rise in diesel prices will likely further drive the preference for Iranian diesel in the country.
