Iraq war may adversely affect the economies not only in the developing world but also of the developed countries


Feb 24 - Mar 02, 2003 



Millions of the protesters from the West to the East and from North to the South displaying a "NO" for war against Iraq all over the world they demonstrated for the sanctity of the human rights as well as to avert disruption of oil supplies which may worsen the global economic crisis.

Ken Livingstone mayor of London was quoted saying "this war is solely about oil; George Bush was never given a damn about human rights". There are worldwide concerns that Iraq war may adversely affect the economies not only in the developing world but also of the developed countries, otherwise no such level of restlessness was ever shown on the human killing in India, Afghanistan and Palestine.

Pakistan which heavily relies on the imported oil has however already proceeded on a policy to minimize dependence on the imported oil especially for power generation, transportation and other heavy industries.

According to an assessment, Pakistan will be saving $600-700 million at the end of December 2003 as a result of conversion of its power generation from furnace oil to locally produced gas.

The Oil Marketing Companies operating in Pakistan have raised the prices of various petroleum products last week. There was a general fear that if the war was imposed on Iraq the oil prices will further jump which ultimately have multiplier effects on the general prices. As the Iraqi crisis continues, prices of petroleum products have continued their upward trend. The FOB prices of Arabian light crude oil during the last fortnight reached a peak of $30.60 per barrel and registered an increase of 3.1 per cent when compared to the prices of January this year.

Similarly, the product prices have also increased sharply and the fortnightly average Arab Gulf FOB price of Naphtha has increased by $26.17 per ton or 9.88 per cent, to $290.98 per ton, kerosene oil by $3.08 per barrel.

Pakistan State Oil and Shell Pakistan have increased the high speed diesel prices by 7.59 per cent or Rs1.65 to Rs23.37 a liter. Since December 31, 2002, the oil marketing companies have raised petroleum products prices by as much as 18 per cent reflecting the increase in global crude oil prices. World oil prices have risen on concerns of a possible US-led attack on Iraq, and strikes in Venezuela may lead to shortages of the POL products. Pakistan imports about 85 per cent of its fuel needs. Sheikh Rashid, Federal Minister for Information and Media Development has recently expressed apprehensions that huge increase in prices of petroleum products is likely if the US leadership opts for a military action against Baghdad. He cautioned that the regional economies and the world economic scenario will receive a big setback in case war erupts in Baghdad.



Pakistan's oil import which revolves around $3 billion a year may further bloated if the upward trend in oil prices persists in future also.

Apart from the current disturbed conditions on account of Iraq situation, it is the need of the hour that the economic managers accelerate the pace for finding oil substitutes to get rid of the dependence on the import oil to meet the local requirement. In this connection, while the gas resources are being developed, there is the need that the huge reserves of coal should also be used effectively to replace the oil-based industries in Pakistan. According to reports, an agreement for carrying out bankable feasibility study of vast Thar coal reserves was signed with Reheinbraun Engineering, a German company in Karachi recently.

There are some 164.123 billion tons of proved coal reserves in the country out of which 98 per cent or 173 billion tons exist in the province of Sindh. The feasibility study would cost Rs198 million and Geological Survey and Sindh Coal Authority would be the executing agencies on behalf of the Federal and Sindh governments respectively.

Sindh Coal has 40-50 per cent water content which could be used along with coal for power generation. According to German experts these coal reserves could also be used for producing of chemical products. However, the Thar coal carrying moisture is not suitable for cement industry which has already been shifted from oil to coal based system. In order to utilize the huge coal reserves in Thar, power plants are needed to be installed at the mine-heads to get the maximum benefits of the coal resources.

So far these coal reserves are used by the brick kilns mainly because the average moisture is 23 per cent and sulphur 5.72 per cent. It produces 3415 kilocalories per kg. The imported coal, having a heating value of 6500 K Cal/kg with very low moisture containing 0.5 to 0.8 per cent sulphur is generally used by the cement industry in Pakistan.

A better quality coal is also available at Sor Range in Balochistan, having a heating value of 5200-5400 K/Cal and costs Rs2000 per ton at the mine head in Balochistan. The cost of the locally produced coal can be reduced further if the coal production is made on the economy of the scale.

The situation demands that in the greater national interest all available energy resources are required to be fully exploited to cut down the cost of production and to arrest the price hike trend in the country. This is an achievable goal if we move in that direction with a firm commitment to make our people happy and prosperous.