Tuesday, November 20, 2018

Higher prices fail to dampen fuel demand

Sunday, September 16, 2018, 17:16
This news item was posted in Business category and has 0 Comments so far.

Demand growth for petrol and diesel stayed strong in August despite record prices although overall oil demand growth decelerated to less than 1% in the country from nearly 8% in July.The weaker rupee and high crude oil prices have combined to take fuel prices to record highs in the country but that doesn’t seem to have hurt demand for transportation fuel much. In August, consumption of petrol rose 7.8%, and diesel 4.2% from a year earlier. Petrol and diesel sales had grown by 7.8% and 4.9% respectively in July when prices were lower.Robust sales growth in petrol and diesel is partly due to the base effect as sales had contracted in August 2017, HPCL chairman MK Surana told ET. The Goods and Services Tax was launched in July last year, and initial confusion that accompanied the roll-out had contributed to contraction in fuel demand in August.Record fuel prices don’t seem to have pushed consumers towards public transport or vehicle sharing. “People don’t shift their transport behaviour on the fly. Only if prices are higher for longer and are anticipated to stay high in future, it may trigger behaviour change,” Surana said. People can’t quickly dump their private cars and bikes since a bunch of convenience public transport just can’t match.Similarly, factories, telecom tower companies, shopping malls or residential societies that use diesel generators wouldn’t stop using them due to higher fuel prices but may plan an alternative if prices stay high for longer, Surana said.A structural shift away from diesel to petrol cars in passenger vehicle segment also partly explains the different growth curve for petrol and diesel demand, he said.Total oil demand that includes naphtha, cooking oil, jet fuel, petcoke besides transportation fuel, expanded just 0.76% from a year earlier in August. In July, it had grown 7.7%.Major contribution in oil demand slowdown has come from petcoke whose consumption has contracted a fifth in August.

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