Er.energyNP@Gmail.com

Despite assurances from the Nepal Oil Corporation that Nepal has sufficient petroleum product storage, there is a sense of unease among consumers.

As tensions rise in the Middle East and global oil supply concerns grow, the Nepal Oil Corporation (NOC) has stated that it has received guarantees of uninterrupted fuel supply from India.

Following Iran's decision to halt oil supply, the prices of petroleum, oil, and lubricants (POL) have surged to over US$100, with projections of reaching $150 if the Middle East conflict persists.

An NOC representative reassured consumers, stating that there is no need for panic. On Tuesday, the benchmark Asian crude oil price Brent crude increased by 3.2% to $80 per barrel, while natural gas prices rose by 30%.

"It may take some time for the situation to stabilize. Depending on the developments, international prices may see a slight increase. However, our prices will remain steady until March 15," said NOC spokesperson Manoj Kumar Thakur.

"After that, prices will be determined by the corporation's automatic pricing system." NOC imports all petroleum products for Nepal from the Indian Oil Corporation (IOC).

Fuel prices in Nepal are set based on the price list provided by IOC on the 1st and 16th of each month.

"So far, there have been no disruptions in imports. We are even importing more than the market demand," Thakur stated. "Fuel is being transported through the pipeline 24 hours a day."

Former Commerce Secretary Purushottam Ojha cautioned that prices are already rising rapidly, and if the situation does not improve, supply disruptions could occur. He mentioned that India is evaluating the situation and its potential impacts, highlighting that China directly purchases a significant amount of oil from Iran, which Nepal lacks the infrastructure to do.

Nepal's current storage capacity, as per NOC spokesperson Thakur, can sustain demand for approximately10 days even if the supply is completely halted. India primarily sources crude oil from countries like Russia, Saudi Arabia, and Iraq, maintaining reserves for about two and a half to three months before refining.

Daily consumption in Nepal stands at around 2-2.5 million liters of petrol, 4-4.5 million liters of diesel, and a demand for approximately 45,000 metric tons of cooking gas (LPG) per month. The majority of petroleum products enter Nepal through pipelines, with diesel being the most imported fuel,followed by petrol and LPG, while kerosene holds a minimal share.

Tanker deliveries are predominantly used in Jhapa (east), Bhairahawa, Nepalgunj, and Dhangadhi. Despite ongoing discussions for years about constructing infrastructure to store petroleum for three months, the project has faced setbacks due to land acquisition disputes, according to Ojha.

He emphasized that while electric vehicles and appliances are gaining popularity in Nepal, the country still heavily relies on petroleum products. A scarcity of petroleum would have a simultaneous impact on inflation, transportation, and cooking.

Nepal Oil Corporation (NOC) has advised the public to purchase and use fuel only as necessary and avoid excessive hoarding. Thakur highlighted the flammability of petroleum products and the increased risk of accidents when storing them at home, especially with the onset of summer.

He further mentioned that there is an adequate supply of LPG gas being imported and distributed through dealers, although certain brands of cylinders are currently unavailable in the market. The shortage is primarily due to consumer anxiety, and he advised the public not to panic about fuel availability.

Why are concerns about petroleum on the rise?

The escalating conflict in the Middle East has heightened worries that oil supply from key producing regions could be disrupted, leading to a global increase in energy prices.

Asia and Europe would be most impacted if the Strait of Hormuz, a vital maritime passage in the Persian Gulf, were closed or if attacks on oil and gas infrastructure persisted.

NOC spokesperson Thakur stated that the government would take necessary actions if the situation significantly worsens. "

The government and relevant stakeholders will devise strategies based on the evolving situation," he added. "Currently, imports are meeting demand, and India has assured that supply will remain uninterrupted."

Reports indicate that Iran has cautioned against using the Strait of Hormuz, which serves as a transit route for approximately 20% of the world's oil and gas. Oil and gas prices have surged following recent attacks by the United States and Israel on Iran. Qatar Energy, a major exporter, temporarily suspended production at one of its facilities after a military strike on Monday, further driving up natural gas prices.

Former secretary Ojha noted that Nepal has limited options in such circumstances and cautioned that challenging times could lie ahead if tensions persist. "While Nepal's consumption is not a significant portion for India, if India faces a crisis in oil supply, it may impact its ability to continue supplying Nepal as it currently does," he explained.