The oil industry PH at a moderate pace of demand recovery

Since a temporary collapse when Enhanced Community Quarantine (ECQ) was applied in the country, the downstream oil industry is now seeing green shoots of recovery, although this is occurring at a very moderate pace.

Fernando L. Martínez, president of the Association of Independent Oil Companies of the Philippines (IPCCA) indicated that the industry suffered an extreme drop in demand of up to 70 percent during the closing period; then that was reduced to 40 percent as quarantine restrictions were gradually relaxed.

And as movement restrictions were further loosened until the general community quarantine (GCQ) phase, the recovery in demand increased even further, easing the previous depression by 30 percent or increasing the recovery rate of industry at 70 percent.

Towards the end of the year, Martínez pointed out that the demand for oil may reach 80 percent by the end of October, but that will still depend on a greater reopening of the economy that the government will impose.

The president of the group of independent oil players expressed his reservations, although if the industry could reach a comparable volume registered in 2019; given that the sector is still dealing with the economic shock posed by the pandemic.

And although sales are now in continuous recovery, Martínez sets the forecast that the unfavorable scenario for the industry may persist until 2022.

Mainly for oil companies that have largely been catering to the needs of the airline industry, it is anticipated that the grim scenario of volume decline may last a little longer; given that travel restrictions are still ubiquitous due to different security protocols that are in place not only between local governments in the Philippines; but also the executions of various countries.

The aviation sector had been severely affected in recent months; And so far, travel restrictions around the world still limit mobility and thus prolong the dejected environment of the industry.

According to data from the Department of Energy (DOE), product sales volume in January was still at record levels; with gasoline reaching 306,345 million liters; diesel in 340,205 million liters; kerosene in 4.77 million liters; and fuel for planes in 156,877 million liters.

In March, when the blockade in the country began in the middle of the month, the sector immediately felt the drop in sales; with gasoline volume reduced to 78,864 million liters; diesel up to 268,727 million liters; jet fuel was reduced to 122,089 million liters; although kerosene volumes had been roughly stable.

Additionally, in April and May, the industry nightmare worsened as travel restrictions were maintained; And that was the moment when oil companies literally saw their revenues and profits collapse due to the collapse of demand for 60 to 70 percent of fuels.