Petrol shortage

Petroleum minister says consignments have been imported, shortage will be addressed. It may solve the current crisis

Pakistani consumers were faced with another situation of extreme inconvenience as petrol shortage meant that the daily lives of citizens were disrupted through no fault of their own. Long queues, arguments and disappointment at petrol stations were the order of the day as Punjab witnessed another day of poor planning and some bad luck. While the public was quick to blame the government for its inept policies, the crisis was forthcoming as the price of international crude oil tests new lows. With global prices plummeting in the last few months, Pakistani oil companies, as well as refineries, have been reluctant to import high amounts as they were anticipating a further price decline. Their stance basically is: why should they import large quantities and stock fuel when prices are continuously going down. The government revises prices once a month and it has to put up with inventory losses throughout the month. However, the paradox is that consumers, as well as the government, will demand petrol, the price of which has come down around 27 per cent in the last few months, given that CNG is already short in the province.

This whole scenario entails that there will be a supply shortage when it comes to petrol as declining prices sway oil companies from holding inventory. However, these companies should note that their role is to hold inventory after studying possible demand. They should understand market dynamics and know that consumers would want more fuel as they shift from CNG. Demand also goes up when prices come down. This is basic economics. On top of this, the piling circular debt, failure to clear payments of PSO — which has the largest market share — and the fog in Punjab that made transportation slower, and an opportunity to make the case for price deregulation, were all issues that caused the petrol shortage. Ogra will issue notices to oil companies after which they will look to resolve the matter. The petroleum minister has said that consignments have been imported and the shortage will be addressed. This may solve the current crisis. But, this will not be akin to resolving deep-rooted issues of the circular debt.

Published in The Express Tribune, January 18^th, 2015.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.