Petrol, diesel demand declines in the first seven months
October 7, 2017 | 6:33 PM
by A E JAMES/[email protected]
Total gasoline demand in Oman declined to 62,000 barrels per day (bpd) during the January-July period of 2017, against 64,000bpd for the same period of 2016. - Times file picture

Muscat: There was a marked fall in overall demand for petrol (gasoline) in the country in the first seven months of this year, mainly on account of a growth in fuel price after the government removed subsidy early last year.

However, retail fuel prices in Oman remain low by global standards, said Mustafa Ansari, research analyst at Apicorp, which conducted a detailed analysis on fuel demand in the Gulf region after Gulf Cooperation Council (GCC) nations lifted its subsidised price mechanism.

Total gasoline demand in Oman declined to 62,000 barrels per day (bpd) during the January-July period of 2017, against 64,000bpd for the same period of 2016. The average daily demand for petrol in 2015 was 69,000bpd, he added.

However, Ansari said consumption of M91 has increased from 5,000bpd in 2015 to 21,000bpd in 2017 at the expense of lower consumption of Super Grade (or M95), which fell from 64,000bpd in 2015 to 42,000bpd in 2017.

The Oman government scrapped its fixed price policy on petroleum products on January 15, 2016, resulting in a substantial rise in prices. In October 2017, Super Grade petrol price was fixed at 205 baisas, against 120 baisas prior to lifting of subsidies. Prices are adjusted monthly based on international crude oil prices.

“Perhaps, the two most important factors influencing demand in Oman and the GCC as a whole are gross domestic product growth rates and cost of fuel, therefore the impact of energy reforms on retail prices. Diesel tends to be driven more by economic activity as opposed to gasoline, given Oman’s growth between 2013 and 2016 (3 to 4 per cent average), diesel demand did not decline substantially,” explained Ansari.

For gasoline, however, and particularly M95 demand shrunk by more than 34 per cent, and greater fuel switching was evident with a significant uptake in M91, as consumers attempt to offset the higher cost of fuel by switching to lower cost alternatives.

Diesel demand has also declined. Demand for diesel declined to average around 45,000 barrels per day in the first seven months of 2017, from 52,000bpd for the same period of 2015.

Ansari expects a further downward pressure on demand for petrol and diesel.

He said as retail prices increase, the appetite for more fuel efficient cars will increase. However, this is subject to many factors, including household income.

Referring to the entire Gulf region, Ansari said that demand for diesel declined, mainly due to a fall in Saudi consumption.

As far as the Gulf region is concerned, demand for fuel oil is driven by greater substitution in the power sectors of Saudi Arabia and Kuwait. “Diesel demand will be driven by both retail prices of transportation fuel, as well as demand for the product in the power sector.”

Industrial and economic activities are major drivers of demand for diesel.

Gasoline demand will continue to be driven by economic activity, but more so by energy subsidy reforms, which have so far contributed significantly, especially on the fuel switching front.

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