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July 5, 2020

The oil blowup

Opinion

July 5, 2020

In June, there were around 220,000 confirmed cases of the coronavirus in Pakistan. No one is driving around much. Public transportation is not consuming much, if any at all. Intra-city traffic is at a historical low. Inter-city traffic is almost non-existent. Lo and behold, in June, Pakistan’s Oil Marketing Companies (OMCs) sold 726,000 tons of petrol. This has never ever happened before. The sale of 726,000 tons of petrol in the month of June is a record – a historical record.

On March 25, the Ministry of Energy had directed oil companies “to cancel their planned imports (April onwards)...” On June 5, Ogra issued show-cause notices to OMCs seeking explanation for petrol shortage. On June 11, Ogra “held six major oil marketing companies responsible for petroleum shortage across the country”. Ogra imposed a penalty amounting to a total of Rs40 million on Shell, Total-Parco, PUMA, Go, Hascol and Attock.

On June 26, the federal government – out of the blue and without taking Ogra onboard – increased the price of petrol by Rs25.58 per liter. The PTI government broke a historical record – never before has the price of petrol been jacked up by Rs25 a liter in one go. Intriguingly, government taxes didn't go up by much but the base price skyrocketed from Rs23.99 per liter to Rs45.86 per liter – an increase of more than 90 percent. Lo and behold, on the night of June 26 someone made a cool Rs16 billion.

What’s going on? OMCs include Pakistan State Oil (PSO), Hascol, Go, Shell, Total-Parco, PUMA, AOSPL, BE, ZOOM, ANPL, OILCO, Taj, Euro, OIPPL, Flow and Fossil. Among the refineries we have Byco, National Refinery, Pak Arab, Pakistan Refinery, PARCO Coastal, Attock and Indus. Reportedly, Hascol had stocked up 45,000 tons, Go 45,000 tons and Shell 35,000 tons.

The OMCs and the oil refineries are being well looked after. Who is supposed to safeguard the interests of the 220 million? The Ministry of Energy, Petroleum Division, Government of Pakistan, lists Omar Ayub Khan as the ‘minister in-charge’, Nadeem Babar as the ‘Special Assistant to the Prime Minister on Petroleum’, Mian Asad Hayaud Din as ‘Secretary Petroleum’ or ‘agency executive’ and Dr Shafiur Rehman Afridi, Director-General Oil.

According to the Competition Commission of Pakistan (CCP), “Covid-19 pandemic raises suspicion that artificial shortage might have been created.” OMCs blame the Ministry of Energy. Ogra has challenged the position of the Ministry of Energy Petroleum Division (MEPD) that as the “regulator it was responsible for ensuring 20-day stock at all times”. Interestingly, Ogra blames most of it on the “office of the directorate general oil (DG-Oil)".

The fact remains that between the CCP’s suspicions and Ogra's challenges 220 million would have to cough out an additional Rs16 billion to buy petrol. If it is coming out of someone’s pocket it must be going into someone else’s pocket. We know whose pocket it is coming out of – yours and mine. Who made Rs16 billion on June 26?

The writer is a columnist based in Islamabad.

Email: [email protected] Twitter: @saleemfarrukh