Islamabad:
On Sunday, the All Pakistan Petroleum Dealers Association (PPDA) rejected the government’s decision on Sunday to deregulate oil prices, warning against a national strike if this decision was not reversed.
The association warned that the deregulation of oil prices would allow a foreign company to dominate the country’s energy sector, describing the decision of economic suicide.
Hassan Shah, spokesperson for the association, criticized this decision, declaring that the granting of a powerful Saudi oil company controls total control of the fragile oil market in Pakistan – without consulting the stakeholders – was not in the best interests of the country.
He warned that deregulation would disrupt the entire supply chain, leading to a monopoly on the oil market. Pakistani refineries, he added, would be forced to close because they do not have the financial capacity to compete with multinational companies.
Shah stressed that the elimination of competition and total control to a single foreign company would be a serious strategic error.
He stressed that Pakistan fuel reserves generally do not last more than 15 days. On the other hand, the principles of the free market work in countries which maintain petroleum stocks of several months to ensure the stability of the supply chain.
The deregulation of lubricants and HOBC (octane high-top mixture component), he noted, did not benefit consumers and rather created an oligopoly similar to a cartel. In addition, he criticized the Pakistan Competition Commission (CCP) so as not to ensure the transparency of the system, unlike regulatory organizations in Western countries. Consequently, he warned, consumers would end up paying higher prices rather than benefiting from market liberalization.
Shah has also warned that deregulation would feed inflation, weaken the exchange rate and inflict sustainable damage to an economy already in difficulty. Given the unpredictability of the Pakistan oil market, he supported, no entity should have the authority on fuel prices, as it could trigger a financial disaster.
He urged the Ministry of Defense to assess the strategic implications of the decision, while calling on the government and the Central Bank to examine its potential impact on inflation and stability of currencies.
Political decision-makers, he said, should not risk the country’s energy security to appease a single company. He warned that deregulation would lead to a constant increase in oil prices under various pretexts, harming businesses and the public.
Shah said that, although Western nations have successfully implemented fuel prices on the free market, they only did it after having provided a smooth supply chain and maintained reservations of several months .
Pakistan, on the other hand, has trouble maintaining fuel stocks beyond 15 days, with frequent shortages and secrecy, especially in small cities. He argued that only strict regulations can prevent refineries, oil marketing companies (WTO) and service stations from artificially inflating prices.
Allowing consumers to be exploited, he warned, would destabilize the market and increase costs in all sectors. Since the demand for fuel is very inelastic, deregulation would have devastating consequences.
Shah urged the government to abandon the plan, insisting that the deregulation of oil prices pushes the country towards an economic crisis.
