Petrol, diesel consumption likely to burn out on coronavirus heat

A closed petrol pump during janata curfew, in the wake of coronavirus pandemic, in Prayagraj on Sunday. photo:pti
India is likely to see a drop of 5-10 per cent in the quantity of fuel sales owing to COVID-19 restrictions. The decline in purchases of petrol, diesel, and jet fuel is set to dampen the annual consumption figures of the current financial year and also 2020-21.

This will be a repeat of what happened in China, where demand for all commodities, including petroleum products and steel, had shrunk after the epidemic surfaced in Wuhan, leading to the accumulation of vast stocks.

A reprise of this has been seen in India during the initial three weeks of the epidemic. Based on an estimate by the China National Petroleum Corporation (CNPC), the country’s requirement of gasoline, diesel, and jet fuel may fall 36 per cent during the January-March period (Q1) over the same duration last year.

“We believe that in the next 7-10 days, the situation should become clearer on the extent of the demand destruction and the severity of Covid-19 in India. Our channel checks with oil and gas marketing companies imply 5-10 per cent disruption in initial sales volume from Covid-19 restrictions in India. However, the volume hit could deepen further as the government clampdown intensifies,” said a report by Emkay Global.

Source: PPAC & Emkay Global

A decline in demand is likely to dampen the annual consumption of petrol and diesel. Diesel consumption increased 2.9 per cent from 81.1 million tonnes (MT) in 2017-18 to 83.5 MT in 2018-19. Petrol consumption also saw an 8.1 per cent during the same period. Growth in diesel consumption was expected to go down this year owing to a 7.4 per cent decline in October. 

“Despite the October figures, we are poised to see an increase of around 0.6 per cent in the consumption of diesel and 8 per cent in petrol,” Sanjiv Singh, chairman of Indian Oil Corporation, told Business Standard earlier this month. 

Another oil-marketing company executive indicated there was a 4-5 per cent dip in consumer sales in the past week. “We have seen more decline in petrol,” he said.

Road-sector experts have cautioned movements of commercial vehicles in the coming weeks will slow. The executive also attributed the decline in demand to the fall in crude oil prices. “Our data is based on what dealers are picking from us. Two factors are at play. One, there is weak retail demand, and two, dealers cut down on inventories when crude oil prices decline,” he said.

The executive also said things in India were changing rapidly, and demand during the week starting March 23 could be lower because of the shutdowns till March 31, announced by various state governments.

IOC has estimated a 10-11 per cent demand decline in March, with diesel consumption falling over 13 per cent, jet fuel 10 per cent, petrol 2 per cent, and bunker fuel 10 per cent, said Emkay. Against 2 per cent oil demand growth year-on-year built for the next year if one-month volumes fall by 25 per cent, the full-year demand would be flat, it said.

City gas distribution (CGD) companies have stated the initial hit will be 5-7 per cent in Delhi and 7-8 per cent in Mumbai because piped natural gas and compressed natural gas supplies may be affected. In the case of CGD, against 10 per cent growth estimates if one month records 10 per cent de-growth, full-year growth would come down to 8.5 per cent.

Petrol-pump dealers have stated that the overall hit could be 25-30 per cent, the report said. Fuel outlets have sought to lower outlet timings.

“In the last two weeks, overall demand has fallen 15-20 per cent,” said Ravi Shinde, former president of the Petrol Dealers Association, Mumbai. “In the current scenario, where citizens are being asked to stay home, I would have expected a 50 per cent dip in sales, which has not happened, so far. The turnout is still in significant numbers, specifically of two-wheelers.”

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