Since 2010 investigators revealed that oil demand has raised quickly altogether over the planet due to worldwide oil price has driving down. Rise within the oil price cause to extend within the cost, import bills and price of petroleum products, therefore the fall within the productivity because of growing cost of input (oil) cause fall within the consumption level, investment and consequently in economic process. They have also revealed that so oil price shocks limit the oil consumption which might lessen the economic process. Consumption of energy plays vital role in enhancing the expansion of economy. Oil consumption also plays crucial role in every sector of economy such as power, transport and industrial sector as well. Furthermore, developed countries show more intensity towards energy consumption. Various studies are done on causality issue of energy and economic process. But still there’s dilemma to end the dependable consequences.
In the developing countries like Pakistan where the oil import bill and native production of petroleum products presently recorded decline by almost 20 percent and 12 percent respectively within the half of the present year. One the one hand, vital interchange spending has been saved, while on the opposite it reflects slowing down of the economy also.
According to the Ministry of Finance, Pakistan mostly depends upon oil and gas resources to complete energy requirements. The local production of crude oil remained 24.6 million barrels during July-March FY2019 as against to 21.8 million barrels during the same period previous year. Indigenous resources of oil are not much to quench energy thirst of a growing economy. As a consequence our country has to import large quantity of oil also oil based products from Middle Eastern countries particularly from Saudi Arabia.
Statistics showed that during July-March FY2019, the quantity of crude oil imported remained 6.6 million tons with value of US$ 3.4 billion as against to the quantity 7.8 million tons with value US$ 2.9 billion during the corresponding period last year. The fall was mostly because of rise in international prices. The deferred payment on imported oil from Saudi Arabia will give an ease to the government on balance of payments. Transport and power are the two main users of oil. During July-March FY2019, share of oil consumption in transport rose to 77 from 56 percent during the corresponding period previous year, while share of oil consumption in power declined to 14 percent during July-March FY2019 which was 25 percent during the corresponding period previous year. Mainly, gas being the cheaper source, there is continuous shift of power sector from oil to gas.
According to the Pakistan Bureau of Statistics (PBS), oil imports declined by 19.87 percent in the first six months (July-December 2019) as against to the corresponding period previous year despite higher oil prices in the international market. Sources also recorded that the government of Pakistan must look for the causes behind the dwindling oil consumption. It seems people’s capability to buy fuel has been reduced. After a steep slide of rupee, domestic oil prices have gone up significantly. Less oil import means less demand in the domestic market due to declining transport activity. The investigators furthermore revealed that one factor behind the reduced activity could be more operations through Pakistan Railways in the goods transport sector, but it will be naive to propose that such a huge change has occurred overnight. Even though the Government of Pakistan has been relying on liquefied petroleum gas (LPG) imports, which have gone up approximately 34 percent, this factor should also be ruled out for the import bill of petroleum because of the limited availability of LPG in Pakistan. Although the main stakeholder of oil import – the automobile sector – has also been in the throes of recession for the last one year. The sector experienced a 72 percent drop in sales in the first half of 2019-20.
The sector does not forecast any good days ahead in the ongoing financial year. Though challenge is somewhat universal in nature at the moment but the automobile sector in the country is facing reduced sales challenges mostly due to federal excise duty ranging from 2.5 percent to 7.5 percent on engines of dissimilar horsepower, besides extra customs duty on raw material imports and record high interest rates. Furthermore, the Federal Board of Revenue also keeps tracking the sector. Sad trends in oil import and automobile sector show the improved economy has yet to benefit the common man.
In last I might wish to mention here, Pakistan isn’t oil producing rather oil-importing country. An increase in oil price ends up in inflation, rise deficit and puts downward pressure on charge per unit, which makes imports dearer. The growing oil prices are the foremost concern for all the developing economies and Pakistan is full of it too. The rise in oil price has further effect the daily consumption pattern of households badly.