Pakistan’s oil stocks rise as price hike encourages companies

These can meet 30 days of needs, higher than mandatory 20 days

ISLAMABAD: As part of a policy to build oil reserves in the backdrop of continued tensions on the country’s borders, the government has been successful in pushing marketing companies to boost stocks of petroleum products, which have now gone beyond strategic levels, says a senior government official.



In a meeting held on March 2, the Ministry of Petroleum and Natural Resources told the Economic Coordination Committee (ECC) that stocks of various petroleum products had averaged 30 days of consumption needs on March 1, which were higher than the mandatory requirement of 20 days.



State-run oil marketing leader Pakistan State Oil (PSO) was a major supplier and contributed to maintaining the oil reserves, though its receivables shot up to Rs265 billion.

The Ministry of Defence has been insisting for a long time on taking petroleum stocks to mandatory strategic levels. According to the licensing condition for oil marketing companies, they are bound to keep stocks for at least 20 days of needs.

However, they failed to maintain reserves in line with requirement over the past few years, which sparked concern in the defence ministry.

In January 2015, petrol stocks plunged to sharply lower levels, which led to acute shortage of the motor fuel, particularly in Punjab. Consequently, the government suspended top officials of PSO as well as the petroleum secretary.

Earlier, the ECC, in a meeting held on September 23, 2016 noted that the country had petrol stocks for only nine days of consumption and described them as too low.

Meeting participants said reserves of overall petroleum products were for an average of 14 days on September 21, but they were lower than the required 20 days, causing concern among economic managers.

However, petrol reserves were not enough to meet more than nine days of requirement. In view of the unsatisfactory situation, the ECC issued directives to increase petroleum stocks across the country. A country’s defence line also depends on oil stocks and all nations try to keep strategic reserves. Oil marketing companies have been unable to build stocks due to lack of storages and monthly revision - now fortnightly - in oil prices that cause inventory losses in case of a reduction.



For the past couple of months, however, prices of petroleum products have been increased, providing an opportunity to the marketing companies to maintain more reserves and make more money.

Published in The Express Tribune, March 9^th, 2017.

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