Home / Interviews / Surging Oil Prices Will Raise Inflation; Country Needs A Decisive Shift To Indigenous Resources
Surging Oil Prices Will Raise Inflation; Country Needs A Decisive Shift To Indigenous Resources

Surging Oil Prices Will Raise Inflation; Country Needs A Decisive Shift To Indigenous Resources

Interview with Mian Zahid Hussain – Chief Executive, KenLubes International

PAGE: KINDLY TELL US ABOUT YOURSELF:

MIAN ZAHID HUSSAIN: I belong to Chiniot Shaikh family. My factory is located in Korangi Industrial area, Karachi. We deal in the manufacturing of industrial and automotive lubricants. I came into business when I was just 10 years of age while completing my education simultaneously. I took charge of my business when I was about to complete my matriculation. This early age involvement into our business gave me a chance to earn experience of meeting different people and understanding different aspects of trade and business as well as society. President of Pakistan awarded me with civil award of Sitara-e-Imtiaz on August 14, 2007, in the field of social, cultural, religious, educational, philanthropic, economic sectors including community services and maintenance of Law and Order. The Indus University, Karachi conferred me with the Honorary Ph.D degree in 2009 which was duly approved by the Honorable Governor of Sindh.

Due to my close association with the business community and fair knowledge in the field of Information Technology, I was also appointed as the caretaker Minister & Advisor to Chief Minister Sindh for Information Technology Department, for the period March 30, 2013 till May 30, 2013. In 2014, I was appointed as Justice of Peace for Karachi Division by the Government of Sindh for the term 2014-2016.

Owe to my services to community, I have also been appointed as Member Advisory Board for Citizen Police Liaison Committee (CPLC) for 2012-2015. In addition to that I am Member Managing Committee of Pakistan Red Crescent Society also.

PAGE: HOW COULD PAKISTAN’S ECONOMY WITHSTAND THE INCREASING OIL PRICES?

MIAN ZAHID HUSSAIN: Oil prices are always debatable and remain an important variable in determining the economic activity of any country. Pakistan depends heavily on oil as input in industrial, transport and electricity sector. As many developing countries generate electricity from cheap sources like water, wind etc, but in Pakistan, oil is the major source to produce electricity that is costly input. The country has the world’s ninth largest deposits of oil and gas. The reserves are estimated at 27 billion barrels of oil and 282 trillion cubic feet of gas. Yet, Pakistan imports 85 percent of its oil at the rate of nearly $11 billion a year. The price of fuel has tendency to increase further till the demand growth is curbed and new technologies are introduced, which reduces dependency on oil. In Pakistan, the justification for this increase is given by Oil and Gas Regulatory Authority (OGRA) on various grounds. Huge rise in world oil price shifted the burden to the consumers as government is already running severe losses and equally shifted this burden to households.

PAGE: WHAT STRATEGIES SHOULD PAKISTAN HAVE TO DEAL WITH THE RISING OIL PRICES?

MIAN ZAHID HUSSAIN: Rising oil prices would mean more investment in alternate source of energy, which in the longer term would bring the average cost of energy down. Renewable energy, which has received 600% growth in investment over the last 10 years, could well be the next big thing in power and transportation industry. Pakistan enjoys oil and gas discovery success ratio of 1:3.2 for every well drilled, compared to overall world’s success ratio of 1:10 but the drilling density in Pakistan is 2.44 wells per 1,000 sq.km compared to global drilling density of 10 wells per 1,000 sq.km. Investing in indigenous resources will not only reduce the import bill but also create employment, earnings in the form of royalties, taxes and social development of rural areas in Pakistan. The current oil prices present Pakistan with an opportunity to import higher volume of crude. Two of the major areas where the impact of rising oil prices will deeply be felt are remittances and inflation measured by the Consumer Price Index (CPI). Going by conventional wisdom, a surge in global oil prices will increase the rate of inflation in Pakistan that has remained subdued since October 2014.

 

PAGE: HAVE WE DONE ENOUGH TO USE ALTERNATE ENERGY RESOURCES FOR ELECTRICITY GENERATION?

MIAN ZAHID HUSSAIN: In this regard, my view is that renewable energy still remains unused in Pakistan. Most of the energy comes from non-renewable sources like coal, oil and gas. It still remains the top choice to produce energy. Unless we give renewable energy a serious thought, the problem of energy crisis cannot be permanently solved. Renewable energy sources can reduce our dependence on fossil fuels and also could help to reduce greenhouse gas emissions.

Pakistan has huge potential for alternative energy generation, an estimated 2.9 million megawatt (MW) of solar energy and 340,000MW of wind, according to Pakistan Alternative Energy Board as well as some 100,000MW of hydropower. But around 70 percent of its electricity is generated through dirty fossil fuels — primarily oil and gas. As on June 30, 2015, only 28.67 percent of the country’s 24,823MW installed capacity was provided by hydropower while a major chunk, 67.74 percent, was provided by thermal power plants, which burn oil, coal and gas, emitting dangerous earth-warming gases into the atmosphere. A tiny 0.43 percent was provided by wind power. Electric and hybrid car technology, which have grown markedly in the last five years, could well become a substitute to oil/gasoline in the future. It can reasonably be believed that oil as a commodity has started to be replaced and future would see a limited use of oil. What is needed now on urgent basis is the reversal of previous energy policies and better energy resource management in order to boost industrial growth (by providing clean and green energy) that is limited now a days due to depleting oil and gas reserves and price hike.

PAGE: THERE IS PREVALENT ASSUMPTION THAT WE HAVE STILL TO DO A LOT TO USE INDIGENOUS ENERGY RESOURCES IN PAKISTAN. YOUR COMMENTS:

MIAN ZAHID HUSSAIN: Pakistan’s heavy dependence on imported energy was the main cause of circular debt, and the country needs a decisive shift to indigenous resources to reduce dependence on imported fuels. An optimum sustainable energy mix has to be evolved with reference to indigenous resources, economic feasibility and environmental impact. Dasu and Daimer-Bhasha hydropower projects will help improve the energy mix to a considerable extent.

PAGE: YOUR VIEWS ON ENERGY SELF-SUFFICIENCY IN PAKISTAN:

MIAN ZAHID HUSSAIN: Pakistan stands apart from other country in social solidarity and poverty is least visible as in other parts of the region due to the community-based philanthropists and Pakistanis out to help each other. The government has taken solid steps for the restoration of sagging economy and Pakistan of today is much more peaceful, strengthened and prosperous than that of 5 years ago. Self-sufficiency in the energy sector and economic growth would lure more foreign direct investments to the GDP.

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