Falling fuel demand signals weaker economic activity and growing financial stress despite efficiency claims
LAHORE:
The government’s two-year energy-saving campaign, aimed at reducing import costs and easing pressure on foreign exchange reserves, has led to a notable drop in oil consumption. However, while these measures have brought some financial benefits, economists say their broader impact remains limited, with few visible changes in daily urban life.
At the launch of its energy-saving campaign, the government said various measures could save between $1.5 billion and $2.7 billion a year in foreign exchange. To achieve this goal, restrictions were imposed on the use of official vehicles, opening hours of businesses and shops were limited, attendance systems in government offices were changed, and several administrative measures were introduced to reduce energy consumption.
Meanwhile, according to recent statistics, sales of petroleum products in the country also remained under pressure. In May 2026, total sales of oil marketing companies fell 23% year-on-year to 1.17 million tonnes. Excluding fuel oil from the total volume, sales stood at 1.14 million tonnes, which is described as the lowest level recorded for the month of May in the last thirteen years.
According to the report, substantial increases in petrol and diesel prices have also affected fuel demand. The average price of petrol was around Rs 402 per litre, while that of diesel averaged around Rs 401.46 per litre. Due to high prices and reduced economic activity, diesel sales have fallen to an all-time low of just 450,000 tonnes.
Similarly, gasoline sales also declined on an annual basis, while heating oil saw the largest decline in sales. Experts note that increased electricity generation from hydropower and the availability of alternative fuels have also reduced demand for fuel oil.
According to business circles, although the decline in oil consumption can be seen as a positive development, the economic slowdown and increasing financial pressure on the public are also important contributing factors. Experts say a reduction in consumption alone cannot be considered a complete success, as it may also reflect limited purchasing power of citizens and reduced commercial activity.
On the other hand, over the past two years, the government has used the oil tax as an important source of national revenue. As per available official data, around Rs 119 billion was collected through oil tax in FY 2023-24, which increased to around Rs 122 billion in FY 2024-25. Similarly, in the first nine months of the financial year 2025-26, over Rs 120 billion had already been deposited in the national treasury, and an even higher collection target has been set for the next financial year.
Economist Khalid Rasool said the government’s austerity drive was a positive and laudable move as cutting unnecessary spending can benefit any economy. Rasool noted that the campaign produced some benefits and that a reduction in energy consumption was observed in some sectors; however, the situation on the ground appears somewhat different.
“Despite the austerity measures taken by the government, the number of vehicles on the roads remains noticeably high. This suggests that the public’s fuel consumption has not reduced significantly. The government has primarily sought to improve administrative efficiency and limit expenditure, but administrative decisions alone cannot produce a substantial and lasting reduction in energy consumption,” Rasool said.
Rasool further said that achieving sustainable results will require improved public transport systems, promotion of electric vehicles, better urban planning and efficient progress towards alternative energy sources. “Without long-term structural reforms, it will be difficult to take full advantage of temporary measures,” he added.
