ABSTRACT

The oil marketing companies in Pakistan are vital for the selling, importing, marketing, storage, and distribution of fuel to the end consumers. 80% of the market share is held by the top five companies. Prices are fixed by a set formula but the profit margins on each liter of the product are fixed by the government. Regulated by the Ministry of Energy Petroleum Division (MoEPD) through Oil and Gas Regulatory Authority (OGRA). Except for covid-19 period, the growth rate is double-digit. In the last 20 years, the number of OMCs abruptly increased, from five to 66. On the other hand, the country witnessed incidents like January 2015 and June 2020 when retail outlets dried up and prices skyrocketed. These incidents later revealed irregularities in OMC’s functioning, such as non-abidance to minimum stock maintaining rule, discrepancies in the utilization of import quota, and a higher number of retail outlets than allowed. Therefore, this research is aimed at reviewing the performance of the oil marketing sector of Pakistan according to OGRA and Pakistan Oil (refining, blending, transportation, storage, and marketing) Rules. Secondary data for net sales, earnings per share, return on equity, return on capital employed, inventory turnover, operating cycle, and revenue per employee were collected from the financial updates and annual reports of the OMCs. The targeted population was the OMC sector, and the sample size was 6 listed companies holding about 70% of the market share. descriptive analysis, Pearson correlation, and a linear regression model were applied for the analysis of the data using SPSS. Furthermore, to analyze the rules and regulations related to the oil marketing sector, the documents of OGRA rules 2002 and amendments, Pakistan Oil (refining, blending, transportation, storage, and marketing) rule, 2016, and the report of the inquiry commission on the shortage of petroleum products in Pakistan was extensively used to analyze the current situation of the sector and its compliance to rules and regulations. Results reveal that only large OMCs (PSO, Shell, and Attock) are performing well in terms of increasing shareholder wealth. PSO, Attock, and Byco are working continuously to improve employee productivity and bring technological innovation to their operations. Attock and PSO are planning to increase their storage capacity, as it is a part of petroleum policy 2025. No positive correlation is found between sectoral growth and other variables, similarly, the p-value of the regression model was also insignificant for all the independent variables against the sectoral growth. Therefore, it could be concluded that, though growth statistics suggest that the sector is growing at a high pace yet the internal story is a bit different, only market giants are progressing, little progress is found in the small companies. Furthermore,Commission report reveals that OMCs are not maintaining minimum stock, adulteration, and smuggling of products, import quota is underutilized, illegal retail outlets are operating, and the environment, and health and safety measures are not regularly monitored by OGRA. The legal regulatory framework of the sector is also ambiguous. Furthermore, it is recommended to revise the pricing and profit margin fixing mechanism. Digitization of the OMCs, retail outlets, import quota, and utilization of Petroleum products to monitor the supply, demand, and utilization of petroleum products.