The Pakistan Petroleum Dealers Association (PPDA) said on Tuesday that any attempt to deregulate the price of oil is a prescription for economic disaster. Deregulating oil prices will plunge the nation into hyperinflation and instability, ruining millions of people and businesses and potentially leading to the country’s bankruptcy. Since the oil supply chain is extremely unstable, manipulating it could put Pakistan in a situation where a small loaf of bread would cost more than a bag of local currency.
Speaking at a hurried meeting, Hassan Shah, an Executive Committee Member of PPDA, said that deregulating oil prices will cause local currency to lose more value, and the country will become bankrupt. Unrest will occur across the country, and people will not be able to buy bread. Deregulation will make refineries and petroleum companies more arbitrary, leading to a never-ending crisis.
Hassan Shah said that in a country without a price control mechanism, profiteering and violations of the law are common, and anti-cartelization laws are ineffective; deregulation is like playing with the country’s future.
He stated that the private sector should not have control over a vital industry like oil, adding that to move forward with deregulation, Pakistan must maintain an oil reserve that will last for at least 200 days. The nation cannot yet stockpile the oil needed for twenty days. A free market experiment under these circumstances will fail miserably. Despite the current regulation of the oil sector, refineries and oil marketing companies continue to stop supply without fear of legal consequences for profit illegally. He feared that in the case of deregulation, where everyone receives an open exemption, the price of oil would increase repeatedly under various pretexts.
Pakistan’s oil supply system is unpredictable and unstable, often leading to shortages. Sometimes, tankers carrying oil arrive late at the port; occasionally, there are no dollars for oil payments; and sometimes, oil prices rise in the global market.
Oil companies suspend supply if there is little possibility of a spike in the prices for which the masses have to pay for their greed. Deregulation should not allow them to raise prices under various pretexts for unjustified profits. This environment of uncertainty emerges twice a month, instilling fear in the market. If deregulation is implemented, it will be impossible to save the country from hyperinflation. People will face similar situations in Syria and Sri Lanka, and buying bread with a bag of local currency will not be easy.
He said that in deregulation cases, business people would be free to fix the oil price according to their wishes in every city and town, resulting in the exploitation of the masses. He continued by saying that everything, including food items, depends on the market’s oil cost. Oil prices’ unpredictability will lead to extreme cost fluctuations, making life unbearable for individuals and causing businesses to collapse.
Deregulation would cause petrol and diesel prices to vary by city, pump, and brand. Location near the port and refineries may or may not benefit consumers by lowering prices, depending on transportation costs. This would affect the prices of everything, and authorities would not be able to handle it.
He noted that various government entities cannot oversee and address cartelisation by marketing corporations and safeguarding consumers from evil acts.
Similarly, there is no mechanism to stop companies from preventing imports or tackling oil shortages when prices drop in the international market.
Hasan Shah said that the government should not accept the whole wish list of lenders and reject OGRA’s proposal to deregulate oil prices to save the country from bankruptcy.