Fuel shortages

Jun 06 2020


THE shortages of vehicular fuel in various parts of the country are grounds for concern and must not be allowed to turn into a full-scale crisis of the sort the country saw in 2014. The shortages exist because of the confluence of two unusual situations. One is the lockdown of April and May during which demand for vehicular fuel plummeted, while the other is the collapse of oil prices, followed by their rapid rise. The two are linked in the sense that international oil prices collapsed because of the global lockdowns, but their effects have transmitted themselves to Pakistan’s oil supply chain separately. Oil companies were reluctant to book shipments of the fuel at a time when local demand had fallen and inventories had piled up. And when the lockdown was lifted and demand returned, the government had passed through the lower price to the pumps, which made it difficult for the companies to arrange future shipments.

There is no doubt that Pakistan’s oil supply chain is extremely fragile and can run into difficulties very quickly. Both operational and financial problems can cause the supply chain to break down. But it is always the government’s responsibility to ensure this does not happen. This is because vehicular fuel is too important a product to be left to its own devices, and also because the government assumes responsibility for pricing as well as supply issues. At the moment, the leadership seems committed to passing through major oil price benefits to the consuming public, against the advice of the Finance Division which sees an opportunity to generate revenue amid the price declines, as well as of the oil marketing companies, who argue that declines in the price at the pump complicate the effort to arrange future supplies. One can be agnostic on the question of pricing, but if the supply chain is disrupted to the point of creating a fuel crisis, the responsibility must squarely lie with the government.

Published in Dawn, June 6th, 2020