Saarc proposes collective import of crude oil

The South Asian Association for Regional Co-operation (Saarc) has proposed to Pakistan to participate in the proposal to collectively import crude oil and thereby defuse the impact of the expected surge in oil prices in the international market. Sources told Business Recorder that an option on the table for hedging crude oil price may be for Saarc member countries to collectively import crude oil.
Saarc member countries include India, Nepal, Bhutan, Bangladesh, Sri Lanka, Maldives and Pakistan. Saarc, established in December 8, 1985, has a mandate to provide a platform for the people of South Asia to work together in a spirit of friendship, trust and understanding. It works towards accelerating the process of economic and social development in member states and encourages co-operation in agriculture, rural development, science and technology, culture, health, population control, narcotics control and anti-terrorism.
According to sources, the Saarc Secretariat, supported by regional centres established in member countries, has floated a proposal before the government of Pakistan urging it to participate in the collective import of crude oil. Saarc secretariat is of the view that combined import of crude oil can secure the member countries by defusing the impact of rising global oil prices in future.
Currently, crude oil price is close to $ 70 per barrel, and energy experts are of the view that it may go up to $ 100 per barrel by the end of current fiscal year if the global economy is out of the recession. However, the mechanism for collective import of crude oil is still under discussion among the member states, sources said.
Pakistan has one major reservation about the proposal: Saarc member countries, like Bhutan, Nepal and Afghanistan, are not importers of crude oil. Along with Pakistan, India is the big importer of crude oil, but dollar parity of each country's currency is different, that would not allow for collective import of crude oil. Uncertainity in global oil prices is another factor that can bar member states from entering into collective import of crude oil, experts said.
According to Energy Information Administration (EIA), Afghanistan, Nepal and Bhutan did not import crude oil during 2004-08 as these countries have zero refining capacity of crude oil. Afghanistan imports refined products from Pakistan to meet domestic requirement as well as demands by Nato forces engaged in fighting war against Taliban. Pakistan and India are the only two main importers of crude oil.
India, in 2008-09, paid $75.5 billion to the oil exporting nations to meet the energy requirement of the growing economy on import of 128 million tons of crude oil. Pakistan is forecast to spend $ 4.42 billion on import of 63.136 million barrels crude oil if its average price remains below $ 70 per barrel in the international market. Total consumption of petroleum products has been projected to increase by 25 percent to 23.678 million tons in 2009-10, against 18.958 million tons consumed last year. Total spending on petroleum products, both local and imported, has been projected at $ 10.234 billion, against $ 9.271 billion of last year.