Islamabad:
The Pakistan Petroleum Distributors Association (PPDA) rejected the government’s decision on Sunday to deregulate oil prices, warning of a strike throughout the country if the measure was not invested.
The association warned that deregulating the price of oil would allow a foreign company to master the country’s energy sector, describing the decision as economic suicide.
Hassan Shah, the association’s spokesman, criticized the measure, stating that granting a powerful Saudi oil company complete control over the fragile Pakistan oil market, without consulting interested parties, it was not the best for the interest of the country .
He warned that deregulation would interrupt the entire supply chain, which led to a monopoly in the oil market. The Pakistani refineries, he added, would be forced to close, since they lack the financial capacity to compete with multinational corporations.
Shah emphasized that eliminating competition and delivering total control to a single foreign company would be a serious strategic error.
He stressed that Pakistan’s fuel reserves generally do not last more than 15 days. On the contrary, free market principles work in countries that maintain months of months to guarantee the stability of the supply chain.
He pointed out that the deregulation of lubricants and HOBC (high octane mixing component) has not benefited consumers and, on the other hand, has created an oligopoly similar to a poster. In addition, he criticized the Competition Commission of Pakistan (CCP) for not guaranteeing transparency in the system, unlike regulatory bodies in Western nations. As a result, he warned, consumers would end up paying higher prices instead of benefiting from market liberalization.
Shah warned even more than deregulation would feed inflation, weakened the exchange rate and inflict lasting damage to an already fighter economy. Given the unpredictability of the Pakistan oil market, he argued, no unique entity should have full authority on fuel prices, since it could trigger a financial disaster.
He urged the Ministry of Defense to evaluate the strategic implications of the decision, while asking the Government and the Central Bank to examine its potential impact on the inflation and stability of the currency.
Policy formulators said, they should not risk the country’s energy security to appease a single corporation. He warned that deregulation would lead to a constant increase in oil prices under several pretexts, harming both companies and the public.
Shah clarified that, although Western nations have successfully implemented the free market fuel price, they did it only after guaranteeing a soft supply chain and maintaining reservations of months.
Pakistan, on the other hand, struggles to maintain fuel reserves beyond 15 days, with frequent shortages and dry, particularly in smaller cities. He argued that only strict regulation can prevent refineries, oil marketing companies (WTO) and fuel stations artificially inflicting prices.
Allowing consumers to be exploited, warned, would destabilize the market and increase costs in all sectors. Since the demand for fuel is highly inelastic, deregulation would have devastating consequences.
Shah urged the government to leave the plan, insisting that deregulating oil prices would push the country towards an economic crisis.
