End of golden era? Rebounding oil prices spell bad news
KARACHI: The golden epoch for oil importing economies like Pakistan comes to an finish as wanton exporting countries determine for a initial time given 2008 to cut oil supplies.
The pierce has served a purpose of a Organisation of Petroleum Exporting Countries (Opec) – dominated by Saudi Arabia – and Russia (a non-Opec member), as cost of a benchmark wanton oil, Brent, has risen by 10% in dual days to a 14-month high above $54 a barrel.
The convene in wanton oil is approaching to continue in a days and weeks to come. This is really going to impact Pakistan, that meets 80% of a oil requirement by imports.
Oil stays a singular largest import commodity of Pakistan. It has alien oil value $3.21 billion in a initial 4 months (Jul-Oct) of a stream mercantile year 2016-17. This is 22% of sum imports of $14.50 billion in a 4 months, according to a Pakistan Bureau of Statistics.
The ceiling trend in oil cost globally is all set to supplement a impact on a already widening twin deficits (trade and stream account), as each $10 per tub arise in general oil prices increases Pakistan’s import check by $1.25 to $1.5 billion per year.
Dr Ashfaque Hasan Khan, an economist, pronounced that Opec and non-members’ fortitude to cut reserve and boost prices would leave a “worst impact on Pakistan’s economy”.
The supervision has dual options to understanding with this challenge. One is to revoke taxation rates on petroleum products to keep prices during stream levels in retail. Second is that it might pass a cost boost on to end-consumers. “I am certain that a supervision will opt for a second option,” he said.
Khan pronounced a swell in petroleum product prices would take prices of all other line adult along with it. “This will supplement inflationary vigour in a economy,” he said.
He foresaw that wanton oil (Brent) cost might arise to $60 per tub by Jun and Jul 2017. He removed that prices had strike a record high of $147 per tub only before a financial predicament gripped universe economies in 2007-08 and overwhelmed a bottom of $32 per tub late final year or early this year.
Muzammil Aslam, another economist, said, “The swell in general oil cost would leave a disastrous impact on a economy.”
“The approaching cost arise will boost a import check and supplement vigour on unfamiliar sell reserves. This might pull authorities to correct a electricity tariff upwards underneath fuel cost adjustment.”
The approaching decrease in forex pot and inflationary vigour might means a slack in mercantile growth, he said.
The supervision is targeting to grasp an mercantile expansion rate of 5.7% for a stream mercantile year 2016-17. Also, a State Bank of Pakistan has progressing foreseen mercantile expansion in a operation of 5-6% this year. Fuel oil and electricity sojourn essential for a industries of any economy. Economists have pronounced Pakistan has missed a event of reviving a bum industries, as it did not pass on a impact of high decrease in general oil prices when they were hovering during neatly reduce levels. And now, a commodity’s cost is set to rise.
Meanwhile, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi pronounced a other day that petroleum product prices in Pakistan were low among oil importing countries opposite a world.
“Many of a oil importing countries are offered petrol [mogas] above Rs100 per litre, while we are providing it during Rs66 per litre,” he said.
Positive aspects
On a flip side, a boost in general oil prices might give a tiny event to Pakistan in a prolonged run to boost a exports.
The uptrend in wanton oil might give a much-needed support to a decrease universe economies and oil exporting countries, including Russia, and many European economies to emanate additional direct for increasing imports.
Secondly, a expected inflationary vigour in Pakistan might remonstrate a State Bank to boost a seductiveness rate. This will eventually assistance banks boost their distinction margins.
The cost miscarry will also assistance oil and gas scrutiny and prolongation companies urge their earnings. Besides, it will also assistance give a boost to a Pakistan bourse where oil and banking bonds continue to be among a heavyweights.
The author is a staff correspondent
Published in The Express Tribune, Dec 5th, 2016.
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Article source: http://tribune.com.pk/story/1253290/end-golden-era-rebounding-oil-prices-spell-bad-news/