India might have discovered a self reliance formula to recover from the lockdown but its oil refineries are dwindling thumbs; wondering how to traverse a rock bottom low consumption.
Stockpiles continue to swell in a demand that has gone back to stone age. According to Bloomberg reports, operations across 23 refineries nationwide are reported to be at 77 percent of capacity in May 2020. This has been confirmed by data collected from the oil ministry.
While that was an improvement from a low of 72% in April, when
stay-at-home orders decimated fuel demand and filled storage tanks to the brim,
it was still well down on the 102% recorded a year earlier. The amount of crude
processed, also known as refinery throughput, was almost 25% lower year-on-year
Since the lockdown has opened the stockpiles are not clearing up.
According to R. Ramachandran, director of refineries at Bharat Petroleum Corp, they still have “almost 90 to 95 percent storage capacity occupied and will have to tone this down slowly. We will be calibrating our refinery runs to be consistent with the demand and try to deplete the products in tanks to avoid unnecessary inventory carrying cost.”
It is going to be a tough uphill task to come back to the pre-virus levels of fuel consumption. As the lockdown opens and two and four wheelers hit the roads, consumption has not come to full throttle. International and public travel is still in a complete shutdown mode. This means, consumption levels may take months to recover from this slump.
India’s gasoline consumption is now almost 86% and diesel about 90% of June 2019 level, as informed by Sanjiv Singh, chairman of state-owned Indian Oil Corp. The country’s oil demand isn’t expected to get close to a full recovery until the end of 2020, and it will take two years to return to a normal growth trajectory. This might be a good time to give the consumer some leave way and reduce the prices of gasoline and allied products.
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