Oil and Gas Regulatory Authority Pakistan Chairman Masroor Khan’s warning to the National Assembly Standing Committee on Wednesday that the domestic fuel prices will witness a hike over uncertain surge in the world oil prices, particularly driven by Russia ready to enter Ukraine, was not unprecedented. Thursday morning saw the oil price shoot up to $100 per barrel in the global market as Russia launched a full-scale attack on Ukraine.
Within hours the price shot up by $5 per barrel and was recorded at $105 for the first time since 2014 until the time of writing. Experts believe prices are likely to further rise as global oil supplies were already tight with demand recovering from the lows of the pandemic.
Global oil price is then to remain above $100, while domestic fuel cost will likely touch the record-high level of Rs200 per litre. We knew we will get here sooner or later but the preparation done for it by our economic managers remained little to nothing as usual.
Khan’s warning came on the same day when two tenders for the import of liquefied natural gas (LNG) were cancelled. Reasons for which are unclear. The petroleum secretary told the committee that one LNG cargo has though been arranged at a higher rate, the other could not be. It must be noted that the country had purchased its most expensive cargo ever in November 2021 after a similar cancellation. In the wake of the Ukraine-Russia crisis, whether we will be pushed to do the same is yet to be seen but one thing is certain, the end consumer is going to bear the brunt of the government’s lack of foresight.
Moreover, Pakistan imports wheat from Ukraine therefore prices of food items may also go up in the country. Analysts had been ringing alarm bells since late January when the West warned Russia was deploying thousands of troops near the Ukrainian border. But no contingency plan had been formulated, such as lifting a ban on gas schemes. It must also be noted that owing to the IMF recommendations, petrol prices were increased earlier this month. The board has suggested further hikes in petroleum, oil and lubricants (POLs) and power tariffs. The only respite for Pakistan and the world at large can come from the availability of alternative channels of global oil supplies from OPEC, US shale or Iran.
Washington and Tehran are engaged in indirect nuclear talks in Vienna that could lead to the removal of sanctions on Iranian oil sales. But until then, the economy is in for a bumpy ride with the masses in the front seat.
