Crash in oil prices assist govt to gain profit

Crash in oil prices is an opportunity for countries like Pakistan as even after passing 50 percent of the decline to consumers the government could make up for revenue fall. Qatar gas will be cheaper than domestic gas.

The crash in oil prices is occurring as the pandemic with the US oil prices getting down to a range between $1-2 per barrel at the filing of this report.

The Brent oil prices also got down to around $22-25 per barrel the lowest in 22 years. The glut created by the price war between Saudi Arabia and Russia was compounded by the extremely low oil demand in most developed economies.

China the second-largest economy in the world posted negative growth last quarter in more than 35 years. Europeans are fighting for their life to control pandemic with economic activities almost on a halt.

Pakistan was in the midst of its worst economic crisis before the coronavirus attack and was finding it hard to finance its huge oil bill as the crude oil was hovering in the range of $55-60 per barrel.

After the pandemic, the demand for crude started declining sharply, and it ranged for a long time between $30-40 per barrel in March. Its price started declining sharply in the last 10 days with US oil showing more volatility than Brent

The country should exploit this opportunity as long as it is available. It could lower the gas tariff for all industries much below the price that the government is charging from exporting industries after paying huge subsidy.

At the same time, the cost of electricity from our gas-run power plants would also decline appreciably. The furnace oil rates would be lower than that of coal. It will be an opportunity to streamline our energy and power sector while this opportunity lasts.

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