IN the short run the world oil price may follow its own path as adjustments to the energy policy reversal in the US are expected to materialise in two years at the earliest. Pakistani government is said to be closely monitoring the oil market forecasts, but does not believe that political changes in the US have the potential to rock the global oil price equilibrium.

Federal Petroleum Minister Shahid Khaqan Abbasi was prompt in his response. “Oil is currently between $55-60 and forecasted to stay in this band in the medium term. However, in the past decade, experts failed to predict price spikes on the higher or lower side,” he said.

“Oil prices are affected by a number of supply/demand, commercial and market speculation factors that are hard to foretell,” he added.

“The US is a net energy exporter now through efficiency gains, renewable, shale oil/gas. Any reduction in demand in US will not affect global oil price in the medium term,” he concluded.

The early decisions of the current US administration clearly tilted in favour of fossil fuel industry, brushing aside concerns of environmentalists and communities.

President Trump reversed Obama’s energy policy that closed environmentally sensitive areas for drilling. His order to advance Keystone XL Pipeline and the Dakota Access Pipeline, and the order to expedite environment review and approval process and the discussion over 20% tax on oil import and a tax relief will encourage oil companies.

Experts, however, rule out an impact of a change in US policies on oil production or price over the next two years. They believed higher compliance by OPEC members to curb oil output by 1.2 million bpd for the first half of 2017 will boost oil prices. The projected price band of $50 to $60 in the current year will remain immune to US policy drift.

The respective managements of all oil majors in Pakistan were approached but they declined to say anything on or off the record. Some experts in the oil sector, however, did share their views.

Farooq Rehmatullah, a respected name in the sector, was forthright. “Pakistan’s scale of dependence is too high. We can ignore global happenings, but can’t dodge the impact of oil price movement on the country’s precious reserves,” he said.

“To contain the vulnerability of the economy to exogenous price shocks, the focus of energy policy needs to be on developing indigenous resources and improving logistics infrastructure,” he stressed.

Other experts hammered the underperformance of OGDCL and PPL despite massive concessions and exploration rights. “The private oil companies’ performance is better by a big margin. The United Energy dug about 30 wells in the last one year within the small area in its bound compared to hardly a dozen wells drilled by state-run companies,” said an expert, seconding Rehmatullah’s view.

“With the governance on auto mode we are takers and not makers of deals,” said another expert critical of lack of alertness and absence of homework on the part of the government to broker best possible deals for the country and the people.—A.S.

Published in Dawn, February 19th, 2017