OCAC Issues Dire Warning: Diesel Glut Threatens Oil Sector’s Sustainability


The Oil Companies Advisory Council (OCAC) has issued a stark warning about the oil sector’s sustainability crisis, citing massive stocks of high-speed diesel (HSD) that could hinder refineries’ ability to import crude oil. In a letter to the Oil & Gas Regulatory Authority (OGRA), OCAC highlighted the critical challenges posed by excessively high HSD stocks, primarily due to rampant smuggling of petroleum products from western borders.

According to OCAC, the country currently holds 44 days’ worth of HSD stock, totaling 650,000 tonnes, far exceeding the planned sales of 14,700 tonnes against 23,000 tonnes. This imbalance has led to adverse effects on refineries and oil marketing companies (OMCs), including the need for additional storage space and the closure of distillation units.

The council emphasized that this situation has created a vicious cycle of demand destruction and surplus inventory, jeopardizing the operational viability of the industry. OCAC raised concerns about financial strain throughout the supply chain, as OMCs struggle with suppressed market demand and cash flow issues, impacting their ability to fulfill financial obligations to refineries and retire LCs for imported products.

OCAC urged OGRA to take immediate and decisive actions to restore market equilibrium and prevent the collapse of refineries and OMCs. Despite previous concerns about Iranian smuggled products affecting the oil sector, tangible results against smuggling have yet to materialize. The council’s warning underscores the urgent need for regulatory intervention to address the escalating crisis in the oil sector.

Story by Tanveer Malik

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