Petrol retailers’ strike

At a broader level, the events in Karachi highlight the dilemma of the government in regulating oil prices.


Editorial February 28, 2011

The decision by retail petroleum dealers in Karachi to go on strike only highlights the difficulty faced by the federal government in raising domestic oil prices in line with international rates. The government was expected to raise petrol prices (a decision that was not taken at the time this was written, but which may come into effect by the time this is published) but not by the 16 per cent increase that they have risen in the world market. However, this came under intense criticism from petroleum dealers and retailers who decided to go on strike for a day in the country’s largest city. They, however, seem to have underestimated public anger and resentment, since for much of the day several incidents happened in the city at petrol pumps with irate motorists and motorcyclists demanding that they be given fuel. The anger may have been fuelled further by the deduction, which should be quite easy to make, that the petrol pumps had struck a day before the planned price increase deliberately, so as to profiteer on the stocks of petrol they had in hand. This means that if an increase in the price of oil is to occur, the government should take pains to avoid mentioning it in the media till it actually happens.

At a broader level, the events in Karachi highlight the dilemma of the government in regulating oil prices. While increasing them in line with global rises has a highly visible inflationary impact, not passing on the increase is something that the government can no longer afford to do, since its budget deficit can no longer support such subsidies. In fact, such a large fiscal deficit has substantial inflationary pressures of its own. Pakistan is not an oil-rich state that can afford to give lavish subsidies on petroleum to its citizens. In fact, even Iran, a country with some of the largest hydrocarbon reserves in the world, has eliminated its subsidies on oil. It is time for Pakistan to finally confront the hard truth and do the same. This will be accompanied, one hopes, with greater efforts for conservation and finding energy alternatives.

Published in The Express Tribune, March  1st, 2011.

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