IRREGULAR OIL AND GAS PRICES ENDANGERING ECONOMIC CONDITION
Oct 1 - 7, 2012
Irregular and unexpected oil and gas price rise is endangering the already existing economic condition. High oil prices have damaged Pakistan's economy very significantly, causing inflation, trade deficits, and balance of payment problems, currency depreciation and shortage of energy. Oil price rise are creating acute energy shortage in Pakistan which is now leading into hike in general prices, transportation cost, slackening agricultural and industrial activity. Pakistan imports a large amount of oil to the tune of 10 to 11 billion dollars per year, which accounts for 33 percent of its total imports.
Frequent increase in Fuel prices of HOBC, Premium, diesel prices of High Speed Diesel, Light Speed Diesel & Kerosene Oil prices have caused a negative impact on the economy of Pakistan.
PETROLEUM PRICES FROM 1ST APRIL 2012 TO 24TH SEPTEMBER 2012
DATE HOBC PREMIUM HS DIESEL LS DIESEL KEROSENE 24-Sep-12 Rs.131.9/Ltr Rs.108.45/Ltr Rs.113.3/Ltr Rs.97.17/Ltr Rs.101.63/Ltr 17-Sep-12 Rs.137.96/Ltr Rs.106.72/Ltr Rs.113.77/Ltr Rs.99.27/Ltr Rs.104.68/Ltr 10-Sep-12 Rs.136.46/Ltr Rs.99.9/Ltr Rs.115.52/Ltr Rs.99.41/Ltr Rs.104.06/Ltr 23-Aug-12 Rs.125.01/Ltr Rs.96.78/Ltr Rs.106.19/Ltr Rs.93.3/Ltr Rs.96.35/Ltr 1-Aug-12 Rs.120.16/Ltr Rs.93.57/Ltr Rs.101.79/Ltr Rs.90.11/Ltr Rs.92.83/Ltr 16-Jul-12 Rs.112.52/Ltr Rs.85.9/Ltr Rs.97.21/Ltr Rs.85.33/Ltr Rs.88.19/Ltr 1-Jul-12 Rs.106.88/Ltr Rs.84.49/Ltr Rs.97.21/Ltr Rs.83.71/Ltr Rs.86.25/Ltr 16-Jun-12 Rs.113.32/Ltr Rs.89.51/Ltr Rs.99.69/Ltr Rs.86.57/Ltr Rs.88.79/Ltr 1-Jun-12 Rs.125.07/Ltr Rs.99.97/Ltr Rs.105.77/Ltr Rs.91.59/Ltr Rs.94.05/Ltr 1-May-12 Rs.135.81/Ltr Rs.103.36/Ltr Rs.107/Ltr Rs.97.43/Ltr Rs.99.95/Ltr 4-Apr-12 Rs.135.81/Ltr Rs.103.36/Ltr Rs.107/Ltr Rs.98.74/Ltr Rs.99.95/Ltr 1-Apr-12 Rs.135.81/Ltr Rs.105.68/Ltr Rs.108.16/Ltr Rs.98.74/Ltr Rs.101.69/Ltr ACGR % -0.27% 0.24% 0.42% -0.15% -0.01%
Fuel prices have risen by an unprecedented amounts, while the Oil and Gas Regulatory Authority has also announced an increase in the price of CNG.
Rising prices of gas has tremendously increased the prices of cement and fertilizers. This has affected agriculture and construction sectors and confronted the government various development projects with escalating cost.
According to economist, "if persistent increase in prices of fertilizers, CNG and cement is not halted, agriculture, the mainstay of Pakistan's economy may face hitches in growth, while infrastructure development projects would face costs overrun and increase in transportation cost in the coming months. Food prices and transportation charges are skyrocketing due to frequent abnormal rise in fuel and gas and there is no comfort available to the poor from the government side."
The government seems to be indifferent to the hardship of the poor downtrodden people and the lower-middle class who find it increasingly difficult to make both ends meet with surging prices of the daily foodstuff.
Frequent oil and gas increase and prolonged gas outages and high energy price has led to reduced fertiliser production, which is an important input for the agriculture production. This is contributing to higher prices for all agricultural commodities.
Besides, cement cartels in Pakistan had got release hand and they are earning abnormal profits of billion of rupees at the cost of the poor consumers. This is hitting not only consumers, but also development works, which further hit the economic activities, as well.
The existing oil and gas reserves of Pakistan are on a high decline. Pakistan has already consumed more than 66.5 percent of its 934 million barrels of discovered oil and about 45 percent of its 54 TCF gas reserves.
About 50 percent of Pakistan's reserves were discovered during first 10 to15 years of history of exploration, while the remaining 50 percent reserves have been added during the last 40-50 years.
Production trends and forecasts suggest that we are left with oil reserves only for 10 years and gas reserves for 15-20 years. Since most of the oil fields are at their late stage of life, production could drop even more rapidly than envisaged.
The gas consumption in the transport sector has increased by 14.3 percent, mainly due to a shift from imported fuel oil to relatively cheaper source of gas during July-March 2010-11 followed by the household sector with almost negligible growth rate of 0.75 percent.
Around 30 percent of the country's installed generation capacity is based mostly on furnace oil. It is high time now that the country should revise its energy mix and start making actual improvement. If oil crosses its current resistance level to $150-$200 per barrel there will be further deterioration in trade.
Internationally also oil prices find a novel direction every other day, only to be turned back the very next day. This has been happening in the last two weeks. The US dollar also continues to remain firm, which has somewhat kept the world oil prices in check. The US has also suggested at increasing its stockpile to fight any substantial surge in oil prices and the fear of rising inventory has played its part in keeping oil prices in a restricted form. Saudi Arabia, the world's major oil producer has said its reserve capacity to ensure that oil prices do not behave abnormally and stay close to the Opecs unofficial target of $100/bbl.
High oil prices have become the latest source of worry for the world economy. US economy is becoming ever less energy-intensive, and less dependent on imports. Oil consumption has fallen in the past two years, even as GDP has risen. Americans are driving less and they are buying more fuel-efficient cars. Net oil imports are well below their 2005 peak.
European countries, which tax oil more heavily than USA, has witnessed a smaller impact on growth from changes in the oil price. Greece has been affected by the high oil prices, for instance, is highly dependent on imported energy, of which 88 percent is oil.
In emerging economies the scene is even more different. Oil exporters, from Venezuela to the Middle East, are benefitting oil importers. In 2008 and 2011, the main effect of expensive fuel in emerging economies was on inflation. This is less worrying,
US natural gas prices have fallen below $2 per million BTU (approx 1000 cubic feet), and about one-sixth of the price Pakistan has agreed to pay for Iranian gas. With over 50 trillion cubic feet of known shale gas reserves in Sindh alone, Pakistanis can also enjoy the benefits of cheap and abundant source of energy for decades via the shale gas revolution already sweeping America.
Increased production of gas from shale rock in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled.
To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan has at least 50 trillion cubic feet of recoverable domestic shale gas reserves, according to US Energy Information Administration. Pakistan needs investment and technical know-how to develop its shale gas reserves to assure cheap and abundant energy supply
US oil and gas companies are innovators and leaders in shale gas development. US firms have been so successful that there is now a gas abundant in the United States and gas prices have plummeted to less than $2 per mmBTU (approx 1000 cubic feet).
Around 30 percent of the country's installed generation capacity is based mostly on furnace oil. It is high time now that the country should revise its energy mix and start making actual improvement. If oil crosses its current resistance level to $150-$200 per barrel there will be further deterioration in trade and economic setback to Pakistan.
Some analysts believe that tensions in Syria and the likely imposition of a fresh round of sanctions on Iran will further augment global oil price. The Middle East tensions demand a higher risk premium according to some analysts, and if sanctions on Iran happen, $120/bbl may not be that far.