Deregulation of oil price to cause hyperinflation: PPDA
Source: The Nation
ISLAMABAD - The Pakistan Petroleum Dealers Association (PPDA) said on Tuesday that any attempt to deregulate the price of oil will be disastrous for country's economy. It was of the view that deregulating oil prices will plunge the nation into hyperinflation and instability, ruining millions of people and businesses and potentially leading to the country's bankruptcy.
Since the oil supply chain was extremely unstable, manipulating it could put Pakistan in a situation where a small loaf of bread would cost more than a bag of local currency. Addressing an emergency meeting here, Member Executive Committee PPDA, Hassan Shah said that local currency will lose more value because of deregulating oil prices, and the country will become bankrupt.
He said, "There will be unrest across the country, and people will not be able to buy bread. Deregulation will make refineries and petroleum companies more arbitrary, leading to a never-ending crisis." Hassan Shah said that in a country where there was no price control mechanism, profiteering and violations of the law were common, and anti-cartelization laws were ineffective; deregulation was like playing with the future of the country.
He stated that the private sector should not have control over a vital industry like oil, adding that to move forward with deregulation, Pakistan must maintain an oil reserve that will last for at least 200 days. The nation cannot yet stockpile the oil needed for twenty days. A free market experiment under these circumstances will fail miserably.
Despite the current regulation of the oil sector, refineries and oil marketing companies continue to stop supply without fear of legal consequences to profit illegally. He feared that in the case of deregulation, where everyone receives an open exemption, the price of oil would increase repeatedly under various pretexts. Pakistan's oil supply system was unpredictable and unstable, often leading to shortages. Sometimes, tankers carrying oil arrive late at the port; occasionally, there were no dollars for oil payments; and sometimes, oil prices rise in the global market. Oil companies suspend supply if there was little possibility of a spike in the prices for which the masses have to pay for their greed. Deregulation should not allow them to raise prices under various pretexts for unjustified profits. Twice a month, this environment of uncertainty emerges, instilling fear in the market.
In the case of deregulation, it will be impossible to save the country from hyperinflation. People will face situations similar to those in Syria and Sri Lanka, and buying bread with a bag of local currency won't be easy.
The PPDA Executive Committee member said that in cases of deregulation, businessmen would be free to fix the oil price according to their wishes in every city and town, resulting in the exploitation of the masses. He continued by saying that the price of everything, including food items, depends on the price of oil in the market. The unpredictability of oil prices will lead to extreme cost fluctuations, making life unbearable for individuals and causing businesses to collapse.
Deregulation would cause petrol and diesel prices to vary by city, pump, and brand. Location near the port and refineries may or may not benefit consumers by lowering prices, depending on transportation costs, which will affect the prices of everything, and authorities will not be able to handle it. Hasan Shah noted that various government entities lack the capacity to oversee and address cartelization by marketing corporations and safeguard consumers from unscrupulous acts. Similarly, there was no mechanism to stop companies from preventing imports or tackling oil shortages when prices drop in the international market. He said that the government should not accept the whole wish list of lenders and reject OGRA's proposal to deregulate oil prices to save the country from bankruptcy.