LAHORE: The city continues to face oil shortage which may worsen in the coming days if the government does not move quickly to correct the policy side, say the Petroleum Dealers Association and petrol station owners.

According to office-bearers of the dealers association, the current shortage is more of a policy issue rather than demand-supply imbalance. It all started last month when the world oil prices went on the slide and local refining cost became more than the world price.

“Local refineries stopped refining and started waiting for an official package to help their business,” says Engineer Khawaja Atif Ahmad, information secretary of the Pakistan Petroleum Dealers Assocition..

With refining stopped, the oil marketing companies brought their stocks to a minimum mandatory level of 21 days. The ministry and regulator should have anticipated this situation in the start of last month when the trouble started, but they chose not to and the situation started worsening.

“The current panic set in when the petrol shortage started gripping the cities whereas the diesel shortage is a month-old phenomenon. Right now, Pakistan State Oil (PSO), with a market share of 37 per cent, is the only major supplier in the market. Rest of the companies, with 63 per cent market share, have squeezed supplies and are negotiating with the government for some tax concessions or an overall package like other businesses. If these negotiations fail, or even prolong, market situation would worsen because the PSO cannot take 100 per cent load, with a capacity of 37 per cent only. Its economic woes would only make the situation even bad for it,” Atif explained.

The rest of the oil marketing companies have not absolutely stopped supplies, says Imtiaz Ahmad, a station owner. Big companies are supplying oil but only to their own company-run stations and at much reduced rate: all franchisees are out of supply chain and pulling shutters downs. “It is hardly 10 per cent of what they normally supply. Roughly, the current supplies are less than half of the total city requirement and it may get squeezed further if the government, the ministry and the regulator do not get their act together,” he warned.

Realising the policy problem, the district administration has also restricted itself to checking oil stations against hoarding. “All assistant commissioners have been told to keep any eye on the demand-supply situation and ensure no one hoards oil,” says an official of the commissioner office. There has been no crackdown as such because if supplies are not there, what purpose would raids serve. The administration is visiting station but only to check fuel tanks and see if station are serving people or hoarding: nothing more than that.

Meanwhile, long cues were witnessed at some of the petrol stations in the city, with heated debates and minor jostling reported from some stations. The station owners, however, fear that tempers may flare if supply squeeze continues.

Published in Dawn, June 6th, 2020