The current government is preparing to give oil companies the freedom to set petroleum prices. Dealers and pump owners are opposing this move due to concerns about potential profiteering by oil marketing companies. The nation is already dissatisfied with the power producers (IPPs) in the electricity sector, and now it seems petroleum IPPs may emerge. This decision is likely to lead to arbitrary pricing by petroleum companies, resulting in a situation where, much like the electricity crisis, the nation will be hit hard by rising petroleum costs.
Oil is as crucial as electricity. For exporting countries, it is liquid gold, and for consumers, it has been a source of financial pain for the past fifty years. Oil was discovered in several regions of Pakistan long before it was even considered in the Middle East. This was back in 1960, when oil-producing and exporting countries established the Organization of Petroleum Exporting Countries (OPEC). Most of OPEC’s members are Middle Eastern countries, but it is surprising that its headquarters is in Vienna.
Until 1960, the oil trade was dominated by international companies from the United States and its Western allies, meaning oil-producing Arab countries and others had no real control. Western and American companies had complete authority, taking most of the profits while the producing countries received little. However, by 1960, after ten years of negotiations and consultations, these monopoly companies continued to resist OPEC’s terms, refusing to accept them.
The situation was compounded by the fact that American and other Western companies were conducting oil exploration in various countries. Oil was discovered in Saudi Arabia on March 3, 1938, with the first well in Dhahran, followed by others across the Arab region.
These companies exploited the wealth of the Arabs to its fullest. By 1970, foreign companies were still refusing to accept OPEC’s conditions. OPEC countries issued an ultimatum to either accept the terms or face a halt in oil production. Consequently, the monopoly companies accepted OPEC’s terms. OPEC demonstrated its power during the Egypt-Israel war in 1973, using oil as a weapon, causing chaos in Western countries.
After 1973, oil prices were increased several times, leading to prosperity in the Middle East. Western construction companies then began exploiting this wealth through various development projects, including roads, ports, airports, large buildings, palaces, and bungalows. Pakistan benefited from this by sending a large number of its workers, including laborers, electricians, plumbers, clerks, and drivers, to these countries, which led to a significant inflow of dollars into Pakistan.
This trend continues, but the number of workers has decreased and difficulties have increased. Pakistani authorities are silent on this issue, showing no interest in providing manpower to Saudi Arabia, Kuwait, and other countries, leading many to seek illegal entry into Europe, often resulting in drowning or injury. Agents often disappear after taking large sums of money.
Regarding Pakistan’s petroleum imports, between July 2023 and June 2024, the country imported petroleum products worth 4.781 trillion rupees, a 14.33% increase from the previous fiscal year’s 4.181 trillion rupees. As for crude oil, 9.054 million metric tons were imported compared to 7.823 million metric tons in the previous fiscal year, marking a 15.74% increase.
Allowing open pricing could lead to significant price disparities for petrol and diesel across different regions and stations. Two key parties were not consulted on this matter. The government had announced in August 2022 that the oil industry would be given freedom, allowing a short-term trial with various stringent conditions to gauge results. There is concern that these companies might become as problematic as the IPPs.
The government must take steps to minimize inflation and act in the public’s best interest. The increase in petroleum prices significantly affects every citizen, contributing to a rise in overall inflation. This is a highly sensitive issue, as rising oil prices will impact the poor, including those using motorcycles, rickshaws, taxis, and public buses.