OIL AND GAS PRICE ISSUE IN PAKISTAN
PROF. SAEED AHMAD SIDDIQUI
Oct 1 - 7, 2012
Despite the exchequer being under the heavy burden of Rs. 125 billion, the government of Pakistan did not transfer it to the common masses during the past months. This is also the fact that government was bearing the subsidy given on various consumer goods by borrowing and of increase in the price of oil and the related items would multiply the problems of the masses specially the poverty suffering class.
Every increase in fuel prices expedites the movement of inflationary swing which is highly dangerous phenomenon. High prices of energy are already keeping consumers, traders and business activities under pressures due to which economic growth is depressing persistently. Increase in fuel price began to shower socio-economic curses on the masses with effect from March 1, 2012. Though the government, to subside the burning and agitating sentiments of the people, stated that a mechanism is going to be adopt that 91% domestic consumers would not be impacted by this raise in fuel price but the past experience was revealing the results of that hollow statement.
It is astonishing that the democratic government which assumed power on the votes of people who were expecting that the new government would keep the interest and problems of the masses in view. Despite the problems entangled masses, the government once again dropped the bombshell of dearness by increasing the price of oil and petroleum products by Rs. 5 per liter. Price of diesel and natural gas has also increased. This hike in fuel prices would certainly create crippling effects on the economy which is already in depression. Increase in the prices of oil and gas will create snowballing effects on different consumption items of daily life due to which rate of inflation would certainly go up and consequently it would be impossible for common man to tackle the problem from two sides.
It can't be denied that the oil prices are being increased constantly in the international market by $80 a barrel. Nevertheless, there was no justification of Rs.5 per liter increase in fuel price because the increase in the price of petroleum products was also announced by the government on September 1, 2009 when the international price of oil was more than $70 a barrel. Despite this, determination of price between $70 and $80 means a heavy pressure on the balance of payments. Recent increase in oil and gas price would be culminated into further increase in inflationary pressure, transportation cost and collapse of industrial activities.
As international economy is coming out of recession, demand for and price of oil would gradually increase due to which pressure on consumers, industry and balance of payments would also build up. Increase in energy prices would make our products less competitive in the international markets.
International price of oil has maintained the record of $102 per barrel. Extremely cautious oil exploration policy of OPEC and increasing demand for oil in America also increased prices further and so every chance to take U-turn became bleak.
The cause of persistent increase in general prices was that the past government of Pakistan did not want to earn a bad name therefore no deliberated efforts were made to control inflation. Consequently, the common men had to bear unbearable burden of price hike of necessary items of daily life. After completion of election process, the government was not in a position to curtail the given subsidies therefore, the government had to take the difficult decision of increase in price of oil, diesel and electricity.
With the revision of rates, price of petrol, HOBC, kerosene oil, and light diesel have abnormally increased which has no justification economic an moral. It is also a fact that in the light of change in the political scenario of OPEC and unrest, no option was left for the government of Pakistan except to transfer ever increasing burden of fuel prices to the common masses. Nobody knows that when and where the trend of increase in international prices of oil would stop? But this is also a fact that increasing prices of oil will make not only the economic life of common men miserable but the economy would also receive severe jolts of uncertainty and dearness.
No industrialist, businessman or service provider would digest this price hike therefore they would not only transfer the real burden of enhanced prices on the masses but also would not miss the opportunity of multiplying their personal profits. Since all the clues of economy are interrelated, it is observed that the producers and transporters promptly increase the prices of their products and fairs much higher than the proportionate increase in general price.
Obviously, under these circumstances people will have to face a chain of socio-economic problems. Subsidy given on oil, energy and wheat has already been withdrawn which is one of the important causes of hyper inflation in Pakistan. The rate at which the prices of petroleum products are increasing is absolutely against the price stability concept.
The problem of fuel price hike demands its immediate solution without any delay because getting relief on price index count is not only the urgent need of the time but also the right of the masses. But it should be remembered that the problem will not be solved by constituting a committee and leaving the solution on its self-liked decisions.
Let us hope that the Prime Minister, appreciating the gravity of the problem, would certainly issue the orders to withdraw the recent decision of increasing prices of petroleum products and natural gas so that the intensity of burning feelings and economic hardships of the people may be reduced to some extent.
Rapidly increasing prices of oil have been impacting seriously the world economy but the volume of damage is very alarming for newly emerging economies like Pakistan. History reveals that Pakistan, due to the constant increasing trend in oil prices, had to face many severe recessions in the past. High prices of oil, political turmoil and high levels of inflation are causing economic uncertainty. Macro-economic effects of rising prices of oil are highly damaging on the economy.
SOLUTION: Here, some workable solutions can be extended:
1. The question of paramount importance is that how can this burning issue be addressed? There is only one answer; the available indigenous energy resources should be exploited on war footings. In addition to this, serious attention should be focused on other alternate and possible resources of energy like coal, wind, solar energy, bio-gas, etc. It should also be kept in view that exploration of alternate energy resources is a high risk venture.
2. The measures are needed to be taken on sound grounds to curtail dependence on imported oil which is indispensable to control the rapid pace of inflation in Pakistan. It would be possible only when the indigenous energy resources are developed at the maximum. Moreover, Pakistan can be benefitted through the experiences that how did they develop their renewable energy resources with their efficient utilization?
3. The government can also allow the private sector to invest in energy sector in coordination with government energy programs.
4. Government should award 'tax holiday' to the local as well as foreign companies searching oil in the country. Moreover, they should be provided safe and secured environment from terrorists' activities in different vicinities of Pakistan.
Rapid and startling increase in prices of petrol and petroleum products, diesel and natural gas have created damaging effects on the world as a whole but these effects are more damaging and serious for developing and economically new emerging countries like Pakistan. History reveals that Pakistan has faced serious recessions due to increasing prices. High prices of oil, political turmoil and high level of inflation are increasing economic uncertainty. Macro-economic impacts of increasing prices of oil and gas are highly damaging on the economy. For protecting the economy from the damaging effects of increasing prices of imported oil, it has now become imperative that Pakistan should make untiring efforts to develop other alternate energy resources. Pakistan has already been the pioneer in the use of natural gas as the source of energy and further development in this direction will lead towards the destination of energy independence.