RECENT developments in Pakistan’s oil sector underscore the need to maintain its strategic oil reserves at all times. A shortage of the commodity became evident when Covid-19 started spreading around the world. At the point, when world oil prices had fallen drastically, there were reports that the government was considering the import of oil at those prices. However, later when oil prices decreased, there was no extra oil storage capacity in the country. Had such a capacity existed, the government could have stored cheap oil in bulk quantities and sold the oil strategically when the lockdown eased and demand rose again.
Though the Covid-19 pandemic has affected everything around the world curtailing economic activity, there is hope that the consumption of various oil products will rise again as Prime Minister Imran Khan has announced the gradual easing of lockdown restrictions across Pakistan. Small businesses and transport are reopening to partially revive the economy. In many other countries flight operations are also opening.
As for the future holds of oil industry, a lot depends on how crude oil prices perform in the midst of lockdown dynamics – the new norm that the world will now have to live with.
Major oil and gas service companies in Pakistan have reduced their costs using different strategies. Measures are taken to provide relief to the local oil and gas industry from the adverse effects of Covid-19.
Now more than ever the deregulation of prices and privatisation of assets are needed as deregulation would ‘smooth’ costs and profit margins in the long run. This would enhance transparency, enabling decision-makers to identify steps that require priority attention while ensuring that the kind of choked supply situation the country ran into recently does not happen again.
Syed Ovais Akhtar
Published in Dawn, June 29th, 2020