Oil imports remain high in March

The imports stood at $1.11 billion in the same month of the previous year, according to the data from the Pakistan Bureau of Statistics (PBS).

The data suggests that refineries made significantly high import of petroleum crude during the month despite conflicting reports of slowdown in output in refined products like petrol and diesel in the country.

The import of petroleum crude soared 97% on a year-on-year basis to $530 million in the month compared to $269.5 million in the same month of the previous year, according to PBS.

Besides, the import of refined petroleum products surged 84% to $1.03 billion in the month compared to $560.7 million in the corresponding month of the previous year.

In terms of volumetric growth, the import of crude oil rose 30.6% on a year-on-year basis to 816,723 tons in March, suggesting a recovery in output of local refineries.

The import of refined products improved 6% to 1.38 million tons in the month compared to the same month of last year.

Earlier, the business advocate forum Pakistan Business Council (PBC) said in a study that two-third growth in imports was seen due to exorbitant price hike of commodities at world markets, while the remaining one-third growth in imports was volumetric.

The price of crude stays at over $110 per barrel these days compared to around $70 per barrel a year ago. The price shot up significantly in the wake of Russia-Ukraine war and reopening of the world from the Covid-19 pandemic.

The import of liquefied natural gas (LNG) increased 3.7% to $240.3 million in March compared to $231.7 million in the same month of the previous year.

The sluggish growth in import of gas is seen mainly due to cancellation of a few shipments to Pakistan under the long-term agreement with suppliers. The suppliers cancelled the delivery orders after the gas price shot to skies (at over $45 per mmbtu) at spot markets compared to significantly low (at around $15 per mmbtu) under the long-term agreement.

Cumulatively in the first nine months (July-March) of the current fiscal year 2021-22, the import of petroleum products including LNG soared 96% to $14.8 billion compared to $7.6 billion in the same period of the last year.

The nine-month data suggests the import of refined products topped the list both in volumetric terms (up 20%) and in dollar denomination (up 111%) on a year-on-year basis. This was followed by LNG import (92% in dollar value) and crude oil (82% in dollar value).

The import of crude enhanced 3% on a volumetric basis in the nine months compared to the same month of last year. PBS reports LNG data only in dollar denomination and not in volumetric terms.

Pakistan saw lofty growth in import of petroleum products despite significant price hike at global markets, as the previous PTI government fixed the products price for four months (up till the end of June 2022) and provided a hefty subsidy of Rs2 billion a day.

“The amount of subsidy amounts to Rs6 billion per day if concession given on taxes (sales tax and petroleum development levy) on sales of the products to end consumers is also accounted,” Pak-Kuwait investment Company (PKIC) Head of Research Samiullah Tariq said.

The new government of Prime Minister Shahbaz Sharif kept prices of petroleum products unchanged on Friday (April 15), as it continued the popular decision of PTI government to provide petroleum products at low prices.

The subsidy on sale of the imported petroleum products carries a neutral impact on inflation reading in the country. It, however, has continued to consume heavily the foreign exchange reserves which fell to two-year now low at $10.8 billion in the week ended April 8, 2022 compared to close to $21 billion some four months ago.

The subsidy amount has, however, increased government borrowing from commercial banks in recent months. The impact of expensive oil imports also stands negative on rupee against the US dollar.