Falling fuel demand signals weaker economic activity and increasing financial strain despite efficiency requirements
LAHORE:
The government’s two-year energy conservation efforts, aimed at reducing import costs and easing pressure on foreign exchange reserves, have led to a remarkable drop in oil consumption. But while the measures have brought some economic benefits, economists argue their wider impact remains limited, with little visible change in daily city life.
When the government launched its energy conservation campaign, the government claimed that various measures could save between approximately $1.5 billion and $2.7 billion annually in foreign exchange. To achieve this goal, restrictions were imposed on the use of official vehicles, business and shop opening hours were limited, attendance systems in government offices were changed, and several administrative measures were introduced to reduce energy consumption.
Meanwhile, sales of petroleum products in the country have also remained under pressure, according to recent statistics. In May 2026, total sales by oil marketing companies fell 23 percent year-on-year to 1.17 million tons. Excluding furnace oil from the total volume, sales were 1.14 million. tonnes, which is described as the lowest level recorded for the month of May in the past thirteen years.
According to the report, significant increases in petrol and diesel prices also affected fuel demand. The average price of petrol reached approximately Rs 402 per litre, while diesel averaged around Rs 401.46 per litre. Due to high prices and reduced economic activity, diesel sales fell to a historic low of just 450,000 tonnes.
Correspondingly, petrol sales also fell on an annual basis, while heating oil had the sharpest drop in sales. Experts note that increased electricity generation from hydropower and the availability of alternative fuels have also reduced the demand for heating oil.
Although lower oil consumption can be seen as a positive development, economic circles believe that economic slowdown and growing financial pressure on the public are also significant contributing factors. Experts argue that a reduction in consumption alone cannot be considered a complete success, as it may also reflect limited purchasing power among citizens and reduced business activity.
On the other hand, over the past two years, the government has used the oil tax as an important source of national revenue. According to available official data, approximately Rs119 billion was collected through the oil tax in the financial year 2023-24, which increased to about Rs122 billion in the financial year 2024-25. Likewise, during the first nine months of the financial year 2025-2026, more than Rs 120 billion had already been deployed. in the treasury, and an even higher collection target has been set for the next financial year.
Economist Khalid Rasool opined that the government’s austerity campaign was a positive and commendable initiative because reducing unnecessary expenditure can benefit any economy. Rasool noted that the campaign has yielded some benefits and that reduced energy consumption has been observed in certain sectors; however, the situation on the ground looks somewhat different.
“Despite austerity at government level, the number of vehicles on the roads remains visibly high. This indicates that fuel consumption among the population has not decreased significantly. The government has primarily sought to improve administrative efficiency and limit expenditure, but administrative decisions alone cannot provide a significant and lasting reduction in energy consumption,” says Rasool.
Rasool further stated that achieving sustainable results will require improved public transport systems, promotion of electric vehicles, better urban planning and effective progress towards alternative energy sources. “Without long-term structural reforms, it will be difficult to realize the full benefits of temporary measures,” he added.
