It was way back in 2014 and 2015 when global oil prices decelerated from $114 per barrel to $27 per barrel. It was a monumental news for the oil importing countries whereas the oil exporting countries saw their economic growth flagging with every passing day with downtick in oil revenue. Pakistan economy did not seem geared up to take fullest advantage from the situation, to the detriment of the masses. Kudos to the then economic managers.
The prevalent situation across the world indicates that the oil prices are deemed to remain subdued for various reasons. The good news are the would-be, to be precise, peaceful solution of myriads of conflicts globally. The war in Yemen seems to be culminating with peaceful dialogue and better ties among the neighboring countries. Saudi Arabia and Iran might be moving to resolve long-standing issues with dialogue resulting in peace in the region. USA-China trade war is expected to end in the not-too-distant future. The dismal economic growth of China recently might reduce oil import to the world’s largest crude importer. China’s economic growth slowed to 6.2% recently which is the weakest pace in at least 27 years for the second largest economy of the world.
Iran might be exporting more and more oil despite the USA sanctions and the USA might be softening its pressure to ensure that Iran and the USA enjoy cordial relations for the betterment of the world peace. There are news of unabated purchase of Iranian oil by India and China which seems to have satiated the requirement of these two economies, which are among the top five economies of the world.
The oil production in the USA and Russia is at its pinnacle creating whopping reserves. It is being presumed that Saudi Arabia, Russia and the USA seem to have crossed the 11 million bpd mark creating behemoth reserves to the benefit of the oil importers. Venezuela and Nigeria might be tackling the domestic untoward events leading to the spike in the crude production. Conflict resolution in Syria seems to be on the cards which could help Syria enhance its oil producing capacity since it is the only country in the Eastern Mediterranean region with terrific oil reserves. Besides, the environmental pressures globally are taking toll on the crude producing countries. There are signs of weak global economy, which would surely lower oil demand benefitting the oil importing economies.
All above situations augur well for the economy of Pakistan. The economic managers might be looking prudently at all above developments across the world and might have geared up to rejuvenate the economy from the upside of the future oil prices. Pakistan, the importer of oil, spends approximately one-third of its import cost on oil purchase. $16 billion per annum on energy is beyond the tarnished muscles of the debt-laden economy. The deferred oil facility with Saudi Arabia and the UAE are short term steps which might help economy breath, however, this amount is to be paid in a year or two which has to be looked at prudently. This is a short-lived delight, however, in the given situation it could be termed the only way out of the prevailing crisis.
Oil prices were in the vicinity of $50 per barrel in August 2016 whereas the local prices of petrol were around Rs74 per liter in May 2015. The current global oil prices are around $60 per barrel whereas the domestic petrol prices are almost beyond the access of the poor. The current prices of fuel in the country have added to the inflationary pressures and weakened the purchasing and saving capability of the masses. The government needs to rationalize taxes on Petrol and HSD for the benefit of the masses. Besides 17% GST, petroleum levy at a rate of Rs18 per liter on HSD, Rs15 per liter on petrol, Rs6 on kerosene oil and Rs3 per liter on LDO are major worries for the common man.
In order to meet revenue targets, it is pretty easy to impose regulatory duty on import of crude oil and its major products to compensate the shortfall in revenue collection, which makes the job of the Federal Board of Revenue hugely easy. The implications of this particular step could be witnessed in sky high inflation harming the economy and the common man. This also impacts negatively on the saving culture, which is vital for the given state of our economy.