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Fixing oil prices – Pakistani style

Fixing oil prices – Pakistani style

The prices of Brent crude has fallen below $98 a barrel in the international market which is a 17-month low for the sixth straight session, thanks to oversupply and weak demand for the oil in the region. Earlier, the North Sea crude oil reached $115 a barrel after Islamic States of Iraq and Syria took control of several oilfields, when it swept across northern Iraq in June. However, the prices have fallen now more than 15 percent as supply from other countries has increased much faster than the demand. Economists fear that the volatile situation in the Middle East could curb oil production while the slow economic growth, especially in Asia and Europe, also curtailed the demand for oil. As oil supply is growing steadily in some regions, including North America, the world will need less oil from the Organisation of the Petroleum Exporting Countries.

Ironically, the benefits of lower oil prices in the international level have little impact on the petroleum prices in Pakistan thanks to the government financial managers sitting in various departments and councils. The oil prices are devised by keeping in view ex-refinery price, the price which is paid to local refineries, equating to the landed cost of the product, excise duty which is fixed in accordance with ‘wish and requirement of the government’. Instead of providing a helping hand to the people by providing cheap oil to industries and households, petroleum products are an important source of income for the government. Though the inland freight is used to equate the prices of the products all across 29 locations in Pakistan, the cost of transportation varies in accordance with the distance of the retail outlet from the nearest depot. However, consumers are imposed with sales tax calculated at 15 percent of the price before sales tax.

In old days during British Raj, Banias used to calculate the loan amount in a way that ‘this and this amount you owe to me and this and this amount is for the products you purchased from me.’ In this way, they used to charge double for the same commodity from their simple-minded customers. In the same way, instead of providing relief to the people, the financial managers always try their best to squeeze them more and more to extract more and more money from them. They fail to understand that more the benefits to the industry, more and more production would be achieved and more production means more taxes and more revenue in the national kitty.