September 10, 2002	Tuesday	Rajab 2, 1423

KARACHI, Sept 9: Consumers are likely to swallow another bitter pill in shape of rise in domestic oil prices after substantial increase in global oil prices amid US-Iraq tension since the last one week.

“Consumers should now be ready for another price hike on September 15 if the recent surge in global oil prices persists in the concluding days of the current fortnight,” analysts at brokerage houses and officials in oil marketing companies (OMCs) said.

“Domestic oil price may go up by two to six per cent on September 15,” an analyst at a brokerage house said.

International oil prices are now ranging between $29- 30 a barrel as compared to pre-US-Iraq tension at $25-26 a barrel.

All oil prices had already been increased by one to 5.5 per cent by the Oil Companies Advisory Committee (OCAC) followed by a surge of two to four per cent in diesel by three leading OMCs on August 31.

Pakistan imports about 80-85 per cent of its petroleum products requirements and this accounted for 27 per cent of total imports in 2001-2002. With oil prices already 3-4 per cent higher on average during 2002-2003 to date compared to the corresponding period in 2001-2002, an increase in import bill is a strong possibility.

“One dollar a barrel increase in international crude oil price impacts Pakistan’s annual import bill and thus trade balance by $100-150 million,” Research Head of Invest Cap, Mohammad Sohail says.

In 2001-2002, the import bill had declined by 16 per cent due to fall in global oil prices and low consumption of oil products particularly after September 11 incidents.

The increase in oil prices will have a broad-based effect on all components of consumer price index like transportation, food and electricity rates.

Sohail said inflation may exceed the four per cent target of 2002-2003 and end up close to five per cent, if oil prices remain on the higher side amid war fears.

Pakistan’s economy has started showing signs of improvement from July this year and it could be gauged from the fact that petroleum consumption has improved by seven per cent in July. OMCs and oil analysts were expecting six per cent growth in oil consumption in 2002-2003 but the rising trend in global oil prices may hit the forecast of six per cent growth.

As far as storage capacity of oil products are concerned, the government had already taken preventive measures to increase the stocks to 21 days from 15 days when India-Pakistan war fear gripped the region in January this year.

“The situation is almost unchanged till today as of January this year and no further orders have been given by the government to enhance the storage capacity of oil products,” an official in a leading OMC said.

However, OMCs are trying to enhance the storage capacity of petroleum products for future. Pakistan State Oil (PSO) has decided to invest Rs200 million to boost storage capacity of petroleum products by 60,000 tons at Port Qasim by June 2003, an official said.

PSO’s existing capacity stood at 788,000 tons, almost 80 per cent of the industry (including refineries) one million tons capacity.

However, the storage capacity of oil products by OMCs is currently 832,000 tons in which Shell has 153,000 tons as compared to PSO’s 631,000 tons and Caltex’s 48,000 tons.

Shell Pakistan Limited (SPL) plans to invest approximately $31.3 millions in 2002 (which also includes $29 million for white oil pipeline project) for the up-gradation and development of its storage and distribution facilities, an official said.

An overall growth in the industry storage is expected due to White Oil Pipeline Project and associated storage of 180,000 tons. Existing pipeline has a storage capacity of over 150,000 tons.