KARACHI, March 29: Market players and oil analysts have termed the March 31 fortnightly oil price review by the Oil Companies Advisory Committee (OCAC) as very “crucial.” There is a confusion over the question if the government would decide in favour of increasing, decreasing or maintaining oil prices at the current level.
After a decline of six to seven dollars a barrel in world markets in Brent Light crude oil at the start of US attack on Iraq and after March 15-25, the prices have started showing a rebound from the last week over uncertainty how long the war will drag on.
Analysts said the Arab Light Crude, which is taken as benchmark in Pakistan for POL price determination, has hardly moved or lost much value.
“It is true that the Arab Light crude has not witnessed any change in the current fortnight as compared to slight downward change in Brent and US crude prices,” Head of Research, Invest Capital and Securities, Mohammad Sohail said.
He said that the rupee had gained 10 paisa against the dollar which would hardly make any sizable difference in making oil imports cheaper.
Sohail was not sure whether the OCAC would maintain, increase or decrease the prices on Monday. In case the government curtails the petroleum development levy (PDL), then chances will be bright for some price cut, otherwise it is difficult to predict any fluctuations in prices.
Research Analyst at IP Research, Humaira Zaheer sees little chances for any price cut in POL products. However, the OCAC may increase the price by at least 50 paisa per litre or in case of any political pressure it may keep the prices intact to previous fortnight level.
She also ruled out any cut in PDL by the government, saying that it cannot be cut at a very short notice. “Under present scenario — decrease in prices is not expected as long as war prolongs,” she said.
POL prices during January 1 to March 15 have gone up by 13-21 per cent. Diesel price in the last two and half months rose by 21 per cent followed by Mogas and HOBC by 15 and 13 per cent respectively. Light diesel oil (LDO) and kerosene price went up by 19 per cent each during the above mentioned period.
The price of kerosene oil, diesel and LDO have posted a rise of 64, 66 and 51 per cent respectively on March 15, 2003 if compared with prices prevailing on March 15, 2002.
Oil analyst at Khadim Ali Shah Bukhari, Murad Ansari, in his March 27 comment, said that POL prices are unlikely to swing either way in the upcoming price revision. However, a marginal decline cannot be ruled out. He said Arab light crude has hardly lost much value.
He said the uncertainty over the timing of war was now over. But there still remains the uncertainty over how long it would take for this war to end and resumption of oil supplies. The possible resumption of oil supplies from Iraq, second largest producer of oil, remains the key issue for the oil markets.
On the domestic front, Murad said that in spite of growing agitation, the government has continued to pass on the cost impact to the end users. If the government is willing to cap oil prices for the sake of winning political favours at times of referendum or elections, why it is reluctant now when consumers are pressed the hardest owing to rising oil prices, he said.
Oil marketing companies are continuously benefiting from rise in oil prices. He said that since the beginning of the current year — POL prices have on an average increased by 20pc and OMCs inventory gains are soaring.
Till December 1, the government was charging PDL on petrol at Rs9.50 per litre followed by Rs11.20 per litre on HOBC, Rs3.35 per litre on kerosene oil, Rs3.50 per litre on diesel, Rs1.20 per litre on light diesel oil and Rs3 per litre on JP-4.
The business community has also been urging the government to decrease its taxes and surcharges on imported petroleum products in order to offset the increasing trend in domestic oil prices.
They referred to the specific agreements made by Pakistan on oil supply from Muslim countries at price freeze basis and remarked that under such facility the fuel prices in the country should be stable.
Chairman Pakistan Petroleum Dealers Association (PPDA), Abdul Sami Khan has strongly urged the government to reduce prices as the price of Light Arab Crude has not increased much after March 15.
“It is time for the government to take a hit on itself by cutting PDL and other taxes,” he said adding any further increase in oil prices will have a devastating affect on both industrialists and consumers.
He claimed that the consumption of petrol has gone down by at least 15-20 per cent since the rising trend in petrol prices. As a result, conversion of cars into CNG from fuel has taken a further jump in recent months.
An oil analyst said that the deregulation of POL products in 1999 has not given any desired results and consumers have suffered instead of benefiting from the POL sector deregulation.
On October 1999, petrol was available at Rs24.12 per litre which is at present selling at Rs37.20 per litre while diesel prices have risen to Rs25.93 per litre from Rs10.50 in October 1999.
