Pandemic halves fuel consumption in Oman

Muscat: The uptake of motor fuels across the Sultanate plummeted by almost 50 per cent during the second quarter of this year, as pandemic containment measures, including limited lockdowns, work-from-home practices, and the large-scale shuttering of many retail businesses, had a large-scale impact on road transportation, according to key officials representing the fuel marketing industry.

The slump in retail fuel demand was one of the dominant takeaways from a webinar hosted by The Business Year last week on the theme, ‘Fuel Retail Business: Challenges and Lessons Learned’. The panellists comprised David Kalife, CEO – Oman Oil Marketing Company (Oomco); Eng Hamed bin Salim al Maghdri, CEO – Al Maha Petroleum Products Marketing; and Abdulrahman al Yahyaei, CEO – Oman Society for Petroleum Services (OPAL).

Oomco’s Kalife said the impact has been “dramatic” not only for the company’s core retail and commercial fuel business segments, but also for its non-fuel activities encompassing its network of convenience stores, restaurant outlets and other services.

As a result of the pandemic, the decline in revenues from motor fuel sales was around 20 per cent in March, rising to around 50 per cent in April and May, said Kalife.  In June, with a modest pick-up in economic activities following the easing of lockdown measures, there has been a slight improvement in fuel consumption, although the month is expected to end with a 45 per cent decline compared to corresponding figures for last year, he noted.

Significantly, the effects of the pandemic and weak oil prices have also been felt in the commercial segments of the fuel marketing business, Kalife explained. As a result of the cut in oil production agreed by Oman in support of a global output cut, fuel consumption by rigs and oilfield operators has declined by around 10 per cent.  Uptake by companies engaged in construction and infrastructure has slumped as well, he said.

Regardless of an improvement in the overall COVID-19 situation, the impacts of the current pandemic are likely to linger for at least another 18 months, warned Kalife. “Even if there is no second wave, the impact will last through 2021. The best estimate is that we should see growth (comparable with) 2019 levels in September 2021, although some are talking about January 2022. So it means that we will stay in negative territory for the coming one and half years.”

Changes in consumer behaviour will also weigh on fuel consumption in coming years, according to the CEO. Concerns over the use of fossil fuels for the health of the planet may encourage many people to drive less, work from home more, and generally reduce their consumption of motor fuels. Cost-cutting may be another contributory factor, he pointed.

The only silver lining from the crisis, said Kalife, was the drop in prices of fuel at the pump – a benefit accruing to customers, but not to marketing companies, he said.

Eng Hamed al Maghdri of Al Maha Petroleum said the decline in retail fuel sales averaged around 45 per cent during the pandemic, although a slight improvement was evident in recent weeks.  However, demand for jet fuel – a key business stream for the company – was down to “almost zero” as civilian airplanes remain grounded, with the exception of small numbers of cargo planes and limited passenger flights.