Oil Prices: Hype and Reality

Oil price: hype and reality

By Khaleeq Kiani

EVER since the international oil prices started their journey to often set records almost daily basis, policy makers and oil business have accepted it as a God-sent opportunity. While the consumers are severely hit by surging oil prices and its impact on rates of other commodities, oil refineries, marketing companies and the government earn unprecedented windfalls.

The fact that oil refineries, companies and dealers were direct beneficiaries of oil price bubble is understandable but even the newly-elected government has started to give an impression as if nothing could be done to protect the domestic consumer.

The oil-deficit economies are struggling hard to counter this price shock and oil companies and their shareholders are making fortunes everywhere. However, many governments and firms abroad started to think in terms of finding cheap alternatives to cope with the emerging situation. For example, some state governments in the United States introduced plans for cleaner fuel despite existing negligible tax rates on petroleum products and automobile companies rolled out smart cars, fuel-efficient vehicles and electric power engines.

Pakistan�s oil import bills surged to $11.4 billion in financial year 2007-08 against $7.3 billion in 2006-07, showing a substantial increase of more than 56 per cent. But so was the pressing need to do away with the faulty pricing mechanism and adopt innovative approaches to shore up depleting foreign exchange reserves, depreciating rupee and falling purchasing power of the large majority of the population.

Instead of doing away with the deemed duty on diesel and kerosene available to refineries and premiums on oil imports allowed to oil companies, the government increased the rate of general sales tax on almost all petroleum products in the budget 2008. These duties are in addition to GST, excise duty, dealer commission, company margin, ocean and evaporation losses,... [continues]

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