Energy demand in Pakistan and the possibility of inter fuel substitution

Over the years there has been some growth in the demand for petroleum products by transport sector despite increases in prices of various petroleum components. This growth can, in part, be attributed to (a) increase in per capita income, and (b) consumer preference for convenient fuel. Notwithstanding the increase in petroleum demand due to natural increase in base, there has been a tendency of inter-fuel substitution due to manifold increase in gasoline prices and the option and availability of alternative fuel in transport sector. Thus, the conversion of vehicles initially to diesel fuel and now to CNG is a common phenomenon. Within this perspective the objectives of the study are a) to identify the factors that influence gasoline demand, b) to measure the possibility of inter-fuel substitution and the resulting consequences for petrol demand and c) generate alternative demand scenarios to overcome the existing excess supply. Simulation exercise is done to check that what happened when there is an increase the prices of gas or decrease the price of petrol. The simulation results show that if the difference between price of CNG and price of Petrol narrows by 50 percent the petrol demand will increase by 42 percent