Much feared oil price hike took over the consumer
on September 1 as Oil Companies Advisory Committee, whose main
constituents are oil-marketing companies, deemed it fit to raise
domestic prices up by seven to nine percent.
The rise came in with the exorbitant increase in
international oil prices. World oil prices dipped September 2 but
remained in reach of 70 dollars amid supply concerns fuelled by a
shortage of refinery capacity in the wake of Hurricane Katrina.
While untamed prices at international markets give
a good pretext to the policy maker to adjust home price in conformity
with them, they also allows manipulators to make hay of the ongoing
trend. Heedless woes of common, commercial and industrial consumers
are continual and people have been falling prey to oil price bungling
since late 1999.
Actually, it looks quite a funny situation that all
the stake holders including the governments, the economies and above
all the consumers are looking frightfully at the unrealistic oil
prices which are disturbing budgets at all levels whether it's a
budget of a house wife or the government, the only beneficiary of the
rocketing oil prices are the oil marketing companies declaring huge
profits in the recently announced half yearly results.
The profit taking spree was not confined to the
private sector oil marketing companies but in a way the public sector
PSO seems one step ahead in making the hay under the shining sun.
One wonders as to what happened to the pending
references/complaints in National Accountability Bureau (NAB), where a
detailed account of oil price bungling is lying awaited for a just
decision and remedial measures.
The specific charges address several exploitative
practices. Artificial raise in commission of oil marketing companies
(OMC), for instance, is a factor casting unbearable burden on the
consumer. A deep analysis suggests that previously the ministry of
petroleum and natural resources controlled the prices of petroleum
products. But on December 12, 2000, the government deregulated the
product prices and designated OCAC as a regulatory authority. Profit
margins of the OMCs, under the old mechanism, were calculated on the
accumulated ex-refinery prices in addition to customs/excise duty. But
later on the distribution margin and dealers commission was determined
from accumulated prices of ex-refinery price plus customs/excise duty
as well as development surcharge. After adding development surcharge
the OMCs distribution margin and dealers commission have been
increased exorbitantly and the difference in price has been collected
from the people.
Secondly, in order to protect the refineries a
concept of import parity has been implemented, as it was practiced
through out the world. The purpose of the formula was that the prices
of petroleum products at home should not be cheaper or dearer as
compared to the prices of petroleum products in the Middle East.
Platts Oil Gram price report has been taken as benchmark to be
followed, which provides international recognition and standard. Since
Platts did not quote Arab Gulf Gasoline prices prior to year 2000
therefore a formula was developed based on Naphtha price plus price
differential of Caltex Bahrain up to the maximum of 60 dollars per
metric tone. Here it may be noted that Naphtha is a product, which is
not as refined as gasoline. Since January 2002 Platts started quoting
95 Ron gasoline price. Therefore the price of gasoline produced in
Pakistani refineries must have been decided on the basis of gasoline
price quoted in the Middle East and there was no need of following old
system of allocation of price on the basis of price of Naphtha plus
price deferential of Caltex Bahrain.
Insiders said that by not adopting the gasoline
prices as quoted by Platts the general public was forced to purchase
it at higher rates.
How the smartly developed formulae are benefiting
the refineries could be checked with the fact that earning per share
of the refineries in Pakistan has risen at mind-boggling levels. EPS
of Pakistani refinery has jumped to Rs. 68 from Rs. 4 only in five
years. Likewise, the earning of National Refinery has also followed
the same course as it rose to Rs. 44 from Rs. 4 EPS in the same
Some products were also ratified as 'premium' and
the rating was being also exploited.
Platts' rates high-speed diesel (HSD) as a premium
product when it carries 0.5 percent sulfur contents. OMCs had started
importing HSD with 0.5 percent sulfur since 2003. On the other hand
refineries produced HSD carrying one- percent sulfur while still
claiming 2.09 dollar per barrel as premium that comes to around 15.78
dollar per ton.
Likewise exaggerated increases were also being made
in furnace oil prices. Furnace oil prices jack up was so much that a
former chairman of Wapda took this matter to ECC and started importing
its own furnace oil.
The World Bank has also indicated irregularities in
its report on Pakistan Oil and Gas Sector. It stated that import
parity prices needed to be made fully transparent and these should be
posted every fortnight on the ministry of petroleum/ or OCAC website
which has not been done so far.