ISLAMABAD– Cash-starved government in a desperate bid Tuesday added to the miseries of the already overburdened consumers by increasing the prices of POL products up to six per cent while a surcharge up to Rs 14.70 per mmbtu was also imposed on CNG with immediate effect.Though Oil and Gas Regulatory Authority (Ogra), in a bid to benefit the consumers, has recommended the government to maintain the POL prices by reducing the petroleum levy, yet the Finance Ministry, turning down the recommendations of Ogra, has approved further hike in the already sky-high prices of POL products from three to six per cent. Similarly, Ogra had recommended no increase in gas prices but were overruled by the Federal Government.According to Oil and Gas Regulatory Authority’s notification pertaining the prices of petroleum oil and lubricants (POL) for the current month, a further hike of Rs 5.37 per litre in motor gasoline (petrol), high octane blended component (HOBC) Rs 6.29 per litre, high speed diesel (HSD) Rs4.64 per litre, light diesel oil (LDO) Rs 3.43 per litre and kerosene Rs 2.78 per litre has been given this time. Moreover, Finance Ministry has jacked up the ratio of petroleum levy (PL) on HSD by Rs 1.32 per litre. Resultantly, the PL on HSD has reached a high level of Rs6.50 per litre.It is to note here that in accordance with upward trend of oil prices in the international market, the price of HSD was likely to go up by Rs3.11 per litre. After this recent surge, new price of petrol has reached at Rs 94.91 per litre, HOBC Rs 118.20 per litre, HSD Rs 103.46 per litre, kerosene oil Rs 92.02 per litre and the per litre price of LDO has touched Rs 90.21 per litre.Meanwhile, petroleum ministry has issued a notification of imposition of 10 per cent gas infrastructure development surcharge on compressed natural gas (CNG) with effect from today (1st February).Oil and Gas Regulatory Authority has issued a notification pertaining to the revised prices of the CNG after the issuance of notification from ministry of petroleum and natural resources with effect from start of the February. According to the notification of the ministry, a surcharge worth Rs 14.70 per mmbtu has been imposed on the regions of Khyber Pakhtunkhwa, Balochistan and Potohar while Rs 7.90/mmbtu has been decided to impose on Sindh and Punjab regions. In this way, with an increase of 71 paisa, the price of CNG in the region one has touched a record high level of Rs74.29 per kilogram while after this hike of 36 paisa for region two, CNG will be available at Rs 69.60/kg in this region.It is worth mentioning that government had reduced 10 per cent surcharge on 4th January succumbing to the pressure of CNG association’s countrywide strike.
Predictably comments of how this is “democracies revenge” on the hapless people of Pakistan, and how Zardari’s corruption means we pay more at the pump.
What is frustrating is the expectation that, “if there is a shortage of gas, alteast it should be cheaper”. Every few days, some article or the other comes out where the author writes something along the lines that:
“if it wasnt enough that the people of Pakistan are suffering from electricity and gas shortages, they will be shocked to hear that the prices of the oil and gas are on the rise!”
The apathy and indifference of the members of the federal cabinet is evident from the fact that none of them paid any heed to the woes of the people who have been massively burdened with the hike in the prices of petroleum products and the imposition of a 10 percent cess on the compressed natural gas (CNG).Minister of State for Human Resource Development Shaikh Waqas Akram made a point that the increase in POL prices was too much, but no one bothered to discuss or raise the issue and all, including the prime minister, kept mum and the meeting was called off.
For one that is quite judgemental, and the article lacks facts as to what exactly was going on in the meeting. But more to the point, what does “POL prices was too much” mean exactly? What exactly is acceptable increase? And why does everyone believe that its the government responsibility to make prices lower? Who does it benefit?
Have less therefore cheaper?
Now it doesn’t seem to make any sense to alot of people, but it makes perfect sense to me. If a commodity is increasingly scarce its price will increase. Why does anyone expect it to fall?
The price of oil is determined by international market forces. Not free of course: OPEC tries to influence oil prices by manipulating price. Demand from China is a factor affecting energy prices. And recently, the increasingly aggressive tone between Iran and the US, and the Iranian threat to blockade the Straits of Hormuz, has contributed to rising oil prices. Then there are issues of limited refinery capacity that also contributes to higher prices.
Yes, we can argue that petroleum products are heavily taxed. Should the government lower the tax when oil prices increase to give the masses “relief”?
Spoilt silly
The problem with our consumption behaviour is that oil pricing uptil the end of the Musharaf era spoilt us badly. We became used to cheap petrol and diesel. Both were heavily subsidised.
The subsidy on petrol was plainly criminal. It resulted in a massive transfer of wealth from the have nots, to the haves. During 2002-2007, when banks were offering cars on two photocopies of an ID card and a utility bill, it was the urban, salaried class that benefited. The richer you were, the bigger your car, the more extravagant the use. And it was these people who went around filling there tanks with subsidised petrol. Who footed the bill? The taxpayer, and they continue to do so. The debt that was accumulated during this period to keep energy prices at bay in the lead up to the early 2008 elections, still remain.
The burden of that debt and the inflation that increased government borrowing caused hit the poorest hardest. The costs of inflation are dis-proportionetly felt by those on low incomes. While the well off, those people who had taken out consumer goods, including cars on finance and debt, experienced a decline in real terms, as inflations benefits debtors rather than creditors. Further, a salaried individual is more likely to enjoy annual increments in wages, not equal to, but in line with inflationary expectations. The small man is screwed both ways.
Alot of hot air
History will probably judge our move towards CNG as a major disaster. At most it should have been a source of fuel for public transport to cut down its cost. Again, its criminal to see brand new cars converted to CNG. If you can afford to own a Honda Civic or Toyota Corolla, you can afford to pay for petrol. After a decade of cheap CNG, people dont expect its price to rise. Or when it rises they expect the difference between petrol and gas prices to remain the same. However, that is neither sustainable, nor desirable. Households on low income which cant afford UPS’s and Generators, should at least be able to cook and heat there homes. Instead, the CNG Pump Owners lobby not only wants the price to fall and taxes removed, but a reduction in gas load shedding as well. Why should those with the least, have to bear the cost for some guy who can afford to buy his/her own car, but prefers to put gas in it?
Subsidies are generally a bad idea. They encourage over production and/or over consumption. It is also very difficult to make sure that those who the subsidy intends to benefit, actually benefit. Worst off, the economics of energy pricing have been co-opted by political rhetoric.
Every energy price increase is met with accusations of corruption and how democracy has brought us the gift of higher petrol/diesel prices.
The other day I read a comment on the Express Tribune which something something along the lines:
“Even when global oil prices were $142 a barrel, petrol in Pakistan was cheaper than it is now”
Well no surprises there, at that time the Musharaf government maintained the subsidy, by stopping oil prices from rising. It didnt help win him the elections, but it did insure that the new government was setup for failure.
Promises, promises, promises
The worst thing now is for opposition parties to promise lower energy prices. Its high time they all stuffed the rhetoric and say whats needed. Energy prices are going to keep on rising. What they should be focusing on, rather than promising to throw untold, 100s of billions of rupees on subsidies, is on incentivising energy audits, improved insulation and building design, conservation etc. Car producers in Pakistan, who year on year demand tariffs to protect them from foreign competition, need to spurned towards energy efficient engines and design.
Thar coal, more gas in Baluchistan etc etc, are all mirages offered as possible future solutions. They are no closer to reality than they were a few years ago. No one is going to give us free oil, and its economic suicide to expect the state to foot the bill. Its also corrupt on our part to expect subsidies, the burden of which is borne by those who hardly consumer any of it. The poorest and most vulnerable, must and should be protected from inflationary pressure. However, we need to draw a line somewhere. The guy sitting in his brand new Honda Civic, being interviewed on GEO News on how the government should cut petrol prices doesn’t deserve a poor states economic protection.
So gear up for higher prices, and continue to blame corruption, Zardari, democracy, PPP for our ills, just do so while economizing energy use in your surroundings.
Zafar Bhutta ISLAMABAD: With the government desisting from increasing prices of petroleum products at the start of the new year, the impending hike, following the trend of rising oil prices in the international market, was announced on Tuesday, as rates were jacked up by up to six per cent. Oil and Gas Regulatory Authority (Ogra) has [...]
Etihad Airways Carries a Record Number of Passengers in 2011
Etihad Airways, the national airline of the United Arab Emirates, carried a record 8.29 million passengers in 2011, a 17 per cent increase on the previous year. The jump represented an extra 1.197 million passengers on the carrier’s global network covering 82 passenger and cargo destinations.
Etihad Airways President and Chief Executive Officer, Mr James Hogan, said. “This result, achieved while much of the world was facing the economic crunch and oil prices remained high, is testament to our emergence as a formidable force in the international aviation arena. Through strategic expansion we launched eight new routes to Bangalore, Maldives, Seychelles, Chengdu, Dusseldorf, Tripoli, Shanghai and Nairobi last year.
Japanese Prime Minister Yoshihiko Noda retreated Friday from the strong assurances given by Finance Minister Jun Azumi the day before that Tokyo would cut oil imports from Iran.
Noda said Azumi was expressing his “personal view” in supporting the U.S.’s attempt to isolate Iran over its nuclear program.
“Japan’s basic stance is to resolve such matters diplomatically and peacefully,” Noda said. “We need to consult with the business community, and we need to work out details with U.S. officials. We have to think about the implications for Japanese banks, and what measures are needed to resolve possible negative impact.”
Foreign Minister Koichiro Gemba doubted the efficacy of sanctioning Iran, saying the subsequent spike in oil prices would compensate for the deflated demand.
“What’s going to happen if oil prices surge is that sanctions will not be effective,” Gemba said. “The higher oil prices, the more affluent Iran becomes.”
(AFP)
Japan is Iran’s third largest oil importer, behind the E.U. and China. Nine percent of Japan’s oil comes from Iran. The United Arab Emirates, which currently supplies 20 percent of Japan’s oil, assured Gemba it would make up for the shortfall in oil supplies to Japan if Tokyo decides to cut off Iranian oil.
Japan is desperate for energy ever since the March 11 quake and tsunami led to a meltdown at the Fukushima Dai-ichi nuclear power plant. Japan has since shut down the bulk of it 54 nuclear reactors due to popular distrust of the technology.
Any sanctions against Iran that don’t include an oil embargo would be purely symbolic and would do little to curb the Tehran regime. U.S. Treasury Secretary Timothy Geithner failed to get support for sanctions from China against Iran while in Beijing this week. Considering China imports 426,000 barrels of Iranian oil per day, without Chinese cooperation, the West’s sanctions may be prove meaningless, even with Japanese support.
To ensure our readers are ahead and informed, we’ve compiled a list of informative articles for easy reading for a prepared start on Monday morning: 1. As more American’s opt for a cheaper educational experience abroad, they also do the unexpected by staying there … full article on the American Brain Drain can be found [...]
Dr. Douglas Brinkley and Rep. Don Young spar during a Congressional hearing
For fifty years, the U.S. has debated drilling in the Arctic National Wildlife Refuge (ANWR). The 19 million acre refuge was declared a federal protected area in 1960 by President Dwight D. Eisenhower. In 1980, Congress passed the Alaska National Interest Lands Conservation Act (ANILCA), setting aside almost 80 million acres of public lands. Nearly one third of the protected areas was declared wilderness. Numerous national parks, monuments, preserves, and wildlife refuges were created or expanded by the Act. Senators Ted Stevens and Mike Gravel opposed turning over such a large amount of area to the National Park Service, claiming that it would harm the prospects for economic development in Alaska. While the decision was ultimately unpopular, the creation of numerous national park areas served to increase tourism in the state. Still, Gravel lost his seat in the next election, as constituents blamed him for the decision. Furthermore, tourism to ANWR has not increased. The park is extremely remote, with no roads leading to it. Only about 250 visitors come to the park every year (“elitists,” as Representative Don Young (R-Alaska) calls them, as we’ll see later).
While the House voted to declare the entire refuge as wilderness, the Senate differed. In the end, eight million acres of ANWR were designated as wilderness, while 1.5 million acres of coastal plain were not. Section 1002 of ANILCA called for the following in the coastal plain: a “comprehensive and continuing inventory and assessment of the fish and wildlife resources of the coastal plain of the Arctic National Wildlife Refuge; an analysis of the impacts of oil and gas exploration development, and production, and to authorize exploratory activity within the coastal plain in a manner that avoids significant adverse effects on the fish and wildlife and other resources.”
A baseline study was completed by the Department of the Interior in 1987. A more recent report written in 2001 by ANWR staff is a more accurate reflection of current conditions in the park for oil and drilling, yet it is still ten years old. The USGS estimates that between 3 and 10.4 billion barrels of oil are economically recoverable at $30 [1]. With oil at almost $100 a barrel, even more oil is likely economically recoverable. Yet still, there would hardly be enough oil to fuel annual American consumption, which in 2007 totaled 15.1 billion barrels. The amount of oil is also not big enough to impact world oil prices.
USGS Chart with curves showing recoverable oil
People in favor of drilling in ANWR strive to draw a contrast between the coastal plain, also known as “Section 1002,” and the Brooks Mountains in the southern part of the refuge. Drilling would occur on the coastal plain, which they paint as a place that is already developed and no longer pristine. The town of Kaktovik sits on the coastal plain, and one exploratory drill was made nearby in 1985, though it was later plugged and abandoned.
Yet as a counterpoint, the USGS says:
“The 1002 Area is critically important to the ecological integrity of the whole Arctic Refuge, providing essential habitats for numerous internationally important species such as the Porcupine Caribou herd and polar bears. The compactness and proximity of a number of arctic and subarctic ecological zones in the Arctic Refuge provides for greater plant and animal diversity than in any other similar sized land area on Alaska’s North Slope.”
ANWR is the largest national wildlife refuge in the U.S.. The USGS also claims, “Such a broad spectrum of diverse habitats occurring within a single protected unit is unparalleled in North America, and perhaps in the entire circumpolar north.” [2] To the east, Canada has three neighboring protected areas. The two national parks, Ivvavik and Vuntut, are prohibited from oil exploration.
The rest of Alaska’s North Slope is already open for oil drilling. Over the past ten years, the number of Alaskans in favor of opening up ANWR to drilling has stood around or over 70%. President Obama is opposed to drilling in ANWR. However, though he has not opened up the Atlantic and Pacific coasts to more drilling, he has approved more lease sales for offshore drilling in the Arctic. Two new leases sales are planned in the Beaufort and Chukchi Seas in 2015 and 2016, respectively [4]. Another lease sale is planned to take place in 2013 for Alaska’s Cook Inlet, in the south-central part of the state.
Despite Obama’s opposition, Congress seems to be moving closer to opening Section 1002 to drilling. Representative Doc Hastings (R-Washington) and Don Young (R-Alaska) have cosponsored the “Alaskan Energy for American Jobs Act,” which has been referred to the Referred to the Subcommittee on Energy and Mineral Resources. It would repeal Section 1003 of ANILCA, which makes prohibits drilling for oil and gas in Section 1002.
One of the hearings on the bill got quite heated. Last Friday, Dr. Douglas Brinkley, a history professor and expert in Alaskan history, was testifying in Congress in favor of keeping ANWR closed to drilling. Representative Young was at the hearing, and he did not like what Dr. Brinkley had to say. He treated him with disdain, and Dr. Brinkley did not take it lightly. While he sincerely appreciates the wilderness that is ANWR, Rep. Young seems not to. He said,
“The Arctic Plain is really nothing. You say it’s not the heart — it is not the heart. It is not the heart. It is part of the most deficit part of the area. And what hurts me the most as you sit there in the Rice University, when the people support drilling for their good and for the good of this nation, as a college professor in an ivory tower you can go up there and camp and spend your time. And I hope you spend a lot of money.”
The debate on Arctic drilling has sunk to new lows. While it isn’t that surprising that the most vocal champions of preserving Alaska’s wilderness come from the outside – after all, they do not stand to gain economically from drilling there – it is sad that Alaska’s sole congressional representative will not even listen to opposing views.
