Petroleum product prices to be reduced Aug 1: Asim

LAHORE: Adviser to the Prime Minister on Petroleum, Dr Asim Hussain, said on Tuesday that the prices of POL products would be reduced on the first of August because the government had adjusted the margins of oil marketing companies (OMCs) which had made huge profits in the past.

Speaking at the Lahore Chamber of Commerce and Industry, he said the Oil and Gas Regulatory Authority had been directed to make public oil companies’ formula to fix prices on Thursday.

He said the petroleum development levy was a fixed tax and it was far less than the amount levied in other countries.

Dr Hussain said the government had decided to open 90 petrol pumps across the country where ethanol blended petrol called E-10 gasoline would be sold. The fuel was not only cheaper but also environment-friendly, he added.

He said oil, gas and water crises could aggravate in the coming years because consumption was increasing fast.

He said industry was on the priority list for provision of gas, but line losses in Pakistan were eight to nine per cent of total consumption.

He said the government was working on short-, medium- and long-term solutions to overcome energy crisis and was expecting foreign investment of $10 to 15 billion in this sector during the next five years.

The adviser said that the country faced 650 mmcf gas shortage last year which was expected to go up to 800 to 850 mmcf with the setting up of 2,000 new CNG stations in Punjab and 450 in Sindh. The situation required serious efforts for energy preservation, he added.

In his address, LCCI President Mian Muzaffar Ali stressed the need for reducing the margin of OMCs.

He said the high price of petroleum products were adding to the cost of doing business and making products less competitive for the international market. The petroleum development levy was a huge burden on consumers because the general sales tax was already being collected on the sale of petroleum products, he added.

The LCCI chief called upon the adviser to open more blocks for exploration of oil, gas and other valuable minerals. The deal with Qatar for import of liquefied natural gas was very appreciable but there was need to expedite the matter, he added.

Talking to newsmen after a meeting with businessmen at the Governor’s House, Dr Hussain said the country was producing 3.9 billion cubic feet (bcf) of gas against a requirement of eight bcf.

He said the government had adopted a three-pronged strategy to tackle gas shortage. Under short-term measures, liquefied natural gas would be imported next year while liquefied petroleum gas projects were being installed.

The adviser said foreign companies would also be invited to invest in oil and gas exploration projects under a mid-term strategy while new projects to explore alternative energy sources would be initiated under a long-term policy.

To a question, Dr Asim said that a gas project with Iran would be completed within the next few years.

He said the Sui Northern Gas Pipelines had started a topographic survey for the Iran-Pakistan gas pipeline project and an area spread over 100 kilometres had been covered.


The oil price imbroglio

The National Assembly should debate and find a way out of the current imbroglio on oil pricing. This requires a critical review of the skewed tax regime.

In the first week of July, fuel prices were raised, cut and raised again. The price of petrol has now been fixed at Rs62.13 a litre, the same as it was after imposition of carbon tax on July1.

Instead of capitalising on the public goodwill to kick-start the sagging economy, the elected government seems to be doing all in its means to loose its most valuable asset — the public support — by accepting what it calls, ‘politically difficult decisions’ to appease foreign lenders.

The imposition of carbon tax in place of petroleum development levy by the Gilani government from July 1, its termination on the order of the Supreme Court on July seven and restoration of petroleum development levy the next day on July eight through a presidential ordinance were extraordinary measures with a direct impact on the wellbeing of the people.

The carbon tax that was projected to raise Rs122 billion this fiscal year for the government hiked the prices of petroleum products by 7-15 per cent when poverty and unemployment are on the rise.

The increase in the transport charges pushed up the cost of production, in some cases by as much as 10 per cent, and energised the price spiral. Post-July 1, market reported increase in price of many consumer and producer items such as edibles and cement.

There was resentment in the public over the government decision. The decision of the Supreme Court pleasantly surprised the public as prices of petroleum products fell back to June 30 level. The Presidential Ordinance ‘restored’ petroleum development levy with an increase equivalent to the raise announced under the garb of carbon tax.

Dr Asim Hussain, advisor to prime minister on petroleum, defended the position of the government. ‘The government needed revenue from petroleum products to cut the Rs722 billion budget deficit.’

‘The government is bogged down with pricing of wheat, sugar cane, power, gas, oil products for the better part. Let the market determine the prices of products and services and the government should focus on improving the fundamentals to create the right economic environment for growth and development,’ a member of the government research team said on the condition of anonymity.

The biggest opposition party — PML(N) — tried to champion the cause of the downtrodden by opposing the carbon tax but for this, it chose the apex court instead of the parliament.

‘They (PML N) sat through the prolonged marathon budget sessions of the assembly and voted for passing the budget with carbon tax. Coming out of the assembly they headed for the court. What is this? Delayed reaction or hypocrisy? Why did they not tear it (carbon tax) down on the floor of the assembly in the full public view? Which democrat would push the Supreme Court to overrule the decision of the parliament?,’ asked a seasoned analyst from Islamabad.

Even if we cut the dramatics out, it would be wise not to drag the Supreme Court on issues that can well be debated and resolved in the assembly. The solution should be acceptable for donors but must not be against the wishes of deprived people.

‘If this is the beginning of another round of animosity between the two key institutions— the executive and the judiciary, only time would tell. This, however, would not fare too well for the country faced with turmoil and recession,’ commented a worried businessman.

A country’s health dependent on net foreign inflows for growth, cannot, perhaps, afford to be indifferent to its balance sheet. It needs to project itself as financially responsible to achieve credit-worthiness to be able to get the support it desperately needs from development partners.

But why should the burden of narrowing fiscal and current account deficit be borne by ordinary citizens in an inequitable society? Indirect taxes on essential commodities such as oil disproportionately burden the poor. It would be apt for the government to focus on enlarging the tax net and making tax administration efficient and corruption-free.

To show a presentable current account position, it may take drastic measures to cut wasteful spending. There is a huge room to reduce the size of government without compromising its capacity to govern. There are scores of departments that have become redundant.

By publicising and honouring members of assemblies who pay most in taxes, examples could be set for others to follow. What FBR has not been able to achieve by hounding high net worth individuals could perhaps be achieved by setting examples.

‘Instead of squeesing more revenues out of a sliding economy through taxation, would it not be better if the government trims its non-development expenditure, drop orders for new cars for ministers’ chief ministers’ MNAs’ and MPAs,’ cut on lavish parties and extended dinners, stop travelling in company of friends and relatives around the world?

It is the typical behaviour of the private sector to internalise gains and externalise pains. The government is expected to reconcile the competing interests in a society that also suit the interests of the majority. It is also supposed to be a custodian of public interest. It is supposed to keep self-serving interests and socially costly practices in check by laying down rules and regulations that promote social justice.

It is inappropriate, in the first place, to rename a tax to cover up the inefficiency of the government in mobilisation of internal resources.

This is not only the government, the attitude of the opposition is equally intriguing. The PML(N) legislators like other members of the National Assembly took little interest in the budget which was passed once the business of grant approval was completed without any meaningful debate.

It, however, opted to file a petition in the Supreme Court against the carbon tax on oil products instead of tearing it down in the assembly with the help of legislators.

Asian markets crude prices at the end of week falling

SINGAPORE: Oil prices lingered near $50 a barrel Friday in Asia as investors weighed a possible second-half recovery of U.S. crude demand against recent dismal economic data reflecting a severe recession.

Benchmark crude for May delivery fell 33 cents to $49.65 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract on Thursday rose 73 cents to settle at $49.98.

Oil prices have bobbed around $50 a barrel this month as the current backdrop of high unemployment, weak consumer demand and falling corporate profits has tempered investor optimism about an eventual economic rebound.

Falling crude demand and rising inventories have kept prices from rising higher. Storage facilities for crude oil in the U.S. have been swelling since the end of February, bloating to a nearly 19-year high last week.

Oil higher in Asian trade

Oil higher in Asian trade SINGAPORE: Oil prices were higher in Asian trade Thursday, pushed up by a smaller-than-expected rise in US crude reserves, analysts said.

New York’s main contract, light sweet crude for May delivery gained 1.48 dollars to 50.86 dollars. Brent North Sea crude for May delivery advanced 1.50 dollars to 53.09 dollars.

Oil higher in Asian trade

SINGAPORE: Oil prices were higher in Asian trade Thursday, pushed up by a smaller-than-expected rise in US crude reserves, analysts said.

New York’s main contract, light sweet crude for May delivery gained 1.48 dollars to 50.86 dollars. Brent North Sea crude for May delivery advanced 1.50 dollars to 53.09 dollars.

HUBCO receives Rs35.458 bln from WAPDA

KARACHI: The Hub Power Company (HUBCO) has received a payment of outstanding amount of Rs35.458 billion from WAPDA through circular debt settlement arranged by the federal government.

According to HUBCO communique despatched to KSE, Rs30.156billion were immediately paid to Pakistan State Oil (PSO) in accordance with settlement procedure. After this settlement, the receivables against WAPDA are estimated at Rs27.8 billion while HUBCO has to pay Rs24 billion to PSO against the supply of furnace oil.

Oil refineries production sees over 4 per cent growth

ISLAMABAD: The total production of oil refineries has witnessed a growth of 4.14 percent during the corresponding fiscal year 2007-08.

The total production (energy and non-energy) by the refineries during the year amounted to 11.10 million tons as compared to previous year’s 10.66 million tons, posting a growth of 4.14 percent, according to official sources.

All the refineries, except National Refinery Limited (NRL) registered increase in production during the period, while the production by Bosicor refinery was significantly higher due to its increased production capacity resulting from revamping and de-bottle-necking of crude distillation unit.

PARCO’s annual growth for the year under review stood at 3735.8 tons against the previous year’s 3586.2 tons, showing increase of 4.17 percent.

NRL could not perform well in 2007-08 as its production fell to 2585.1 tons from last year’s 2664.5 tons, registering decrease by 2.98 percent.

While, Attock Refinery Limited and Bosicor Pakistan Limited exhibited good performance by attaining 5.39 percent and 16.29 percent respectively.

Oil weaker in Asian trade

SINGAPORE: Oil weakened in Asian trade Friday after an overnight rally driven by the surge in US equity markets, analysts said.

New York’s main contract, light sweet crude for May delivery dropped 29 cents to 54.05 dollars. Brent North Sea crude for May delivery was off 21 cents to 53.22 dollars.

Crude prices likely ran out of steam amid worries the worst is not over for the US economy, analysts said.

Oil prices up in Asian trade

SINGAPORE: Oil prices rose in Asian trade Monday, driven by optimism in the financial markets ahead of an expected US government announcement of a plan to sell toxic assets, analysts said.

New York’s main futures contract, light sweet crude for delivery in May, was up 30 cents to 52.37 dollars a barrel. The Nymex contract for April delivery expired on Friday.

Brent North Sea crude for May delivery gained 45 cents to 51.67 dollars.

“Right now, the crude oil market is primarily driven by the financial markets,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore. “What we are seeing in the crude oil market is a financial rally.”

The US government is expected to to unveil the plan as early as Monday to sell toxic assets weighing down the financial system.

US Treasury Secretary Timothy Geithner would detail the “Public Private Investment Programme” to entice hedge funds and other private investors into investing in bad assets choking banks’ balance sheets, US officials said.

Oil price soars above 50 dlrs

NEW YORK: Oil prices jumped above 50 dollars Thursday after the Federal Reserve moved to inject another trillion dollars into the US financial system to boost the world’s biggest economy.

New York’s main futures contract, light sweet crude for delivery in April, ended 3.47 dollars higher from Wednesday’s close to 51.61 dollars per barrel, topping 50 dollars for the first time in four months.

In early trading Thursday, the contract surged to 52.25 dollars — the highest level since November 28, 2008.

Brent North Sea crude for May delivery rose 3.01 dollars to 50.67 in London after breaching 51 dollars.

Analysts attributed the price jump to Wednesday’s announcement by the US Federal Reserve that it would pump 1.15 trillion dollars into the financial system. The move also has pulled down the US dollar against key currencies.

“You need to put this action in the context of what has happened in the last few weeks in the market. There has been a shift in market sentiment,” said Constanza Jacazio of Barclays Capital.

“From a market where demand was the only driver of price action and sentiment, there seems to have been a shift in a more balanced view,” he said.

Crude futures had slid Wednesday on news of a larger-than-expected increase in US energy reserves that highlighted weak American energy demand, but trimmed losses after news of the Fed plan.

“Oil prices took a rollercoaster ride yesterday (Wednesday), with bearish (US) inventory data … firstly prompting a fall in the April (New York) contract to 47 dollars before the Fed’s surprising announcement,” said Dresdner Kleinwort analyst Eugen Weinberg.

The US central bank said Wednesday that it would buy up to 300 billion dollars in long-term US Treasury bonds over the next six months “to help improve conditions in private credit markets.”