What is needed even more now is the deregulation of prices and the privatisation of assets
KARACHI: Recent key developments in Pakistan’s oil sector underscore the need for the country to maintain strategic oil reserves at all times. Oil shortages became evident when Covid-19 started spreading across the world bringing about a halt in the production of commodities. At a point when international oil prices had fallen drastically, there were reports that the Pakistani government was considering import of oil at low prices. However, they soon realised that the country lacked extra storage capacity. Here, Pakistan missed the golden opportunity of storing cheap oil in bulk quantities which could have been strategically sold when the demand would have increased again after the pandemic ended.
Even though Covid-19 has curtailed economic activity, there is still hope that the demand of various oil products will rise again as Prime Minister Imran Khan has announced the gradual easing of the lockdown whereby small businesses and transport companies will reopen to partially revive the economy. In the meantime, major oil and gas service companies in Pakistan have reduced their costs using different strategies while measures have been taken to provide relief to the local oil and gas industry from the adverse economic effects of Covid-19. The future of the oil industry will depend on how crude oil prices perform in the midst of the worldwide lockdown — a new norm that the world will now have to live with.
In the light of this situation, what is needed even more now is the deregulation of prices and the privatisation of assets. Deregulation would smooth costs and profit margins in the long run. This would in turn enhance transparency, enabling decision-makers to identify steps that require priority attention while ensuring that the kind of choked supply situation the country ran into does not happen again.
Syed Ovais Akhtar
Published in The Express Tribune, May 12th, 2020.
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