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Pakistan need to reduce the dependence on imported oil

Oct 02 - 08, 2000

Once again petroleum prices increased by 10.4 per cent by the government with the justification that OPEC supplied oil prices have been increased. Oil prices have drastically increased during last several years due to high turbulance in world oil market. This is the fourth increase during last one year. This unprecedented price hike will pace up the inflation in the country as instability in rupee against dollar is also there.

Oil prices have touched the high marks during last several years which are expected to touch 40 dollar per barrel in future. Changes in the prices of POL products has its impact in almost every corner of the world specially the countries which have high industrial consumption or used imported oil. POL products are the important source of revenue for the state exchequer throughout the world. Our government also earns huge profit from taxes on POL products, as Minister said that this increase would provide Rs12 billion revenue during remaining ten months of this fiscal year.

The revised price structure of the POL products shows a highest increase of 24 % has been made in the per liter price of kerosene oil with revised price of Rs 14 from Rs 11.25. Similarly light diesel oil stands second with an increase of 22 per cent with an increased rate of Rs 13.50 from 11 per liter. Prices of high speed diesel has also been raised by 13 per cent as HSD would be sold at Rs 15.25 per liter. Prices of regular and super petrol have also been increased by 50 paisa each respectively. Now the new prices of regular and super petrol are Rs 28 and 30 respectively. Prices of HOBC has gone upto Rs 33 with 50 paisa increase and JP-4 raised by Rs 1.50.

But question arises that why do we treat price hike as the only panacea for every problem. Being most significant commodity, our government treats petroleum products as the biggest source of revenue. But this is also the fact that consequences of this are only borne by the impoverished class of the society. So it will increase poverty in the country by multiplying the problems of the commons. As OPEC gave justification for not increasing the supply of petroleum products to decrease the prices, as oil producers are already charging only the 16 per cent price paid by the consumers.


This is a general exercise in our country that whenever oil prices are decreased internationally consumers don't get the reduction but whenever there would have been an increase in it, is immediately transferred to the consumers without considering that whether they have capacity to pay or not. Although government is also bound to take such decisions but it should be coupled with a long run approach because only increasing the prices and devaluing the currency is not only the cure-all for every problem. It will worsen the situation rather than improve.

Like many other decisions, the final victim of this price hike would be a general consumer who have had already been crushed under unprecedented price hike in the almost every commodity of daily use. Increase in the petroleum prices effects all the economic segments of the society.

Addressing the press conference, Minister Petroleum, Usman Aminuddin said, the increase in the prices of petroleum products was inevitable due to the international oil prices. He said that if the government had an alternative then it would not be done, we have no option but to increase. He also said that unlike the 28 per cent increase in international kerosene oil prices we just increased it 24 per cent. At the moment Secretary Petroleum Abdullah Yusuf said, due to increased revenues our petroleum import bill is also likely to rise by 10 per cen.

Immediate result of this price hike would affect the transport sector, with the highest increase in the prices of diesel. Transporters have already given ultimatum for the wheel jam strike against the decision.

The Minister in a press conference also explained the reason of increasing the price of kerosene oil as against the measure to check diesel adulteration. Most of the dealers mixed kerosene with the diesel due to the substantial price difference between the kerosene oil and diesel, so now it would not be beneficial for the dealers to practice this. But this is not the way to eradicate the mal-practice, so only one reason can not outweigh the other most striking side of the picture with less .

Present increase has been made in the oil prices in Pakistan when the economy is facing deep crises. Rupee is devaluing with every coming day and currency value is becoming worsen. People has less purchasing power and increased prices has totally shattered them. This is the time when the government should decide some medium or long term measures to stop further worsening the situation. First we must look for the substitute for petroleum products and develop the oil sources in the country. Although the government is taking measures to increase the CNG culture in the country but this should also make sure that sales tax on CNG kits and similar steps like that would discourage the use of these economical substitute of petrol.

Decision by the American President to use its emergency reserves to tap the oil shortage, would also have its impact in future. Whatever the circumstances Pakistan need to reduce the dependence on imported oil, as a long run remedy, we should discover new oil and gas resources on priority basis.