Islamabad:
A proposal is being considered which, if accepted, would lead to weekly revisions of oil prices, as opposed to the prevailing practice of fortnightly price announcements.
Before moving to fortnightly rate reviews, the government announced changes in oil prices at the end of each month. The fortnightly system came into effect on 1 September 2020.
Now, the Oil and Gas Regulatory Authority (Ogra) – the industry regulator – is discussing with the oil industry the possibility of revising prices every week. In support of the proposal, the regulator has written to stakeholders encouraging them to switch from a fortnightly to a weekly mechanism.
In a letter, Ogra revealed that a proposal is being considered by think tanks to opt for weekly revisions in oil prices and advised stakeholders to submit meaningful reviews and comments, including its pros and cons.
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Earlier, the shift from monthly to fortnightly price reviews came after growing calls from the oil industry in a bid to protect them from inventory losses.
design: mohsin alam
design: mohsin alam
In recent weeks, prices of petroleum products have been revised downwards in the country, resulting in inventory losses for the oil industry. “The policy change to weekly price reviews will help the oil industry to prevent potential losses,” an official said.
Pakistan has seen artificial shortages of petroleum products, allegedly caused by dealers, at regular intervals, especially at the time of price revisions.
In cases where prices are supposed to rise, traders stop selling petroleum products to reap windfalls later. However, when prices are expected to fall, they try to avoid inventory losses by stopping or slowing oil sales.
Weekly price revisions are expected to address such recurring issues. When discussions with stakeholders are over, Ogra will send recommendations to the Directorate of Petroleum for review and present them in summary form to the Economic Coordination Committee (ECC) for formal approval.
Earlier, the previous Pakistan Democratic Movement (PDM) government had agreed to liberalize petroleum products without government control over price fixing, which would be set by the oil industry.
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An energy action group, headed by Shahid Khaqan Abbasi, had decided to pave the way for deregulation. All stakeholders agreed that products produced locally by oil refineries and those imported by Pakistan State Oil (PSO) will be competitive in the domestic market.
PSO imports 50% of oil products, while 50% of oil is produced locally by refineries to meet energy demand.
The government had planned to enforce the system from November 1, 2022, but it could not be implemented.
The plan failed to see the light of day due to the dispute between the then chairman of the energy action group Abbasi and former oil minister Musadiq Malik. The dispute halted work in the energy sector and the PDM administration failed in its efforts to deliver results.
RLNG prices increased
Ogra on Friday announced a 1.2% hike in regasified liquefied natural gas (RLNG) prices with effect from November 1, 2023.
The regulator has officially announced the RLNG rates, an adjustment that is in line with policy guidelines set by the federal government.
The recently set interest rates reflect changes in international markets, particularly LNG and Brent crude prices.
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For Sui Northern Gas Pipelines Limited (SNGPL), the transmission price is now $12.4687 per million British thermal units (mmBtu), down from October’s price of $12.3207. The distribution price has been revised to $13.4930 per mmBtu, from $13.3332. Similarly, for Sui Southern Gas Company Limited (SSGCL), the transmission price has increased to $12.0477 per mmBtu from $11.9086 previously, while the distribution price will be $14.0337 per mmBtu, higher than $13.8716 in October.
These adjustments translate into an overall price increase of 1.20% for SNGPL and 1.17% for SSGCL in both transmission and distribution segments.
The decision to revise RLNG prices came in direct response to fluctuations in LNG and Brent crude prices in the international market, highlighting global energy dynamics and their impact on local energy pricing.
This latest development is expected to have significant implications for both commercial and residential gas consumers in Pakistan. As winter approaches, the RLNG price review could affect heating and cooking costs across the country.
Published in The Express Tribune, November 25u2023.
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