NextFin News - Pakistan’s petroleum consumption plummeted in May as the escalating conflict in the Middle East drove domestic fuel prices to record highs, forcing a sharp contraction in industrial and transport demand. Total sales of petroleum products fell 18% year-on-year to 1.27 million metric tons in May, according to data released Wednesday by the Oil Companies Advisory Council (OCAC). The slump marks the steepest monthly decline since the regional war began in early 2026, highlighting the severe economic toll on one of Asia’s most energy-vulnerable nations.
The contraction was led by a 24% drop in high-speed diesel sales, a critical fuel for the country’s trucking and agricultural sectors, while gasoline demand fell 15%. This erosion of consumption follows a series of aggressive price hikes by the government, which has been forced to pass on the rising cost of global crude—currently trading near $98 per barrel for Brent—to consumers to satisfy the conditions of its ongoing International Monetary Fund (IMF) bailout. The domestic price of gasoline in Pakistan has surged by more than 50% since February, effectively pricing out a significant portion of the middle class and small-scale industrial users.
Samiullah Tariq, Head of Research at Pak-Kuwait Investment Co., noted that the demand destruction is now "visible and structural" rather than seasonal. Tariq, who has historically maintained a cautious but data-driven outlook on Pakistan’s energy sector, argued in a briefing on Wednesday that the current price levels have reached a tipping point where even essential transport is being curtailed. His assessment suggests that the government’s revenue targets from petroleum levies—a cornerstone of the federal budget—are now at risk as the volume of sales continues to shrink. While Tariq’s views are widely cited in local markets, some analysts at larger international brokerages suggest that a portion of the "missing" demand may have shifted to the informal market, specifically smuggled fuel from neighboring Iran, though official data cannot verify this.
The geopolitical premium on oil remains the primary driver of this domestic crisis. With the Strait of Hormuz facing intermittent disruptions, Pakistan’s monthly petroleum import bill has surged toward $3.5 billion, according to a recent policy paper from the Pakistan Institute of Development Economics (PIDE). The institute warns that if global prices sustain levels above $100 per barrel, the country’s current account deficit could widen by an additional $5 billion to $7 billion annually, potentially necessitating a further emergency loan from the IMF or bilateral partners.
Despite the grim sales figures, some government officials maintain a more optimistic stance, suggesting that the slump is a necessary "cooling" of an overheated economy that will eventually lead to a more sustainable trade balance. However, this perspective is not shared by the industrial lobby. The Pakistan Business Council has warned that the combination of high energy costs and shrinking demand is leading to a "de-industrialization" phase, where textile mills and manufacturing units are operating at less than 60% capacity. The divergence between official fiscal targets and the reality of the industrial floor suggests a period of heightened economic volatility as the regional conflict shows no signs of immediate resolution.
Explore more exclusive insights at nextfin.ai.
