The strategic oil reserves are financially burdening the oil marketing companies (OMCs) in the country and the government should focus on building its own oil reserves. Oil Companies Advisory Committee (OCAC) Chairman Farooq Rematullah told newsmen at a press briefing on "oil pricing issue" here on Friday.
He said, "This country (Pakistan) do not have its strategic reserves and the companies are maintaining their reserves, but it is taking too much cost, which is being spent from the POL products margins."
In pursuance of the government''s Reforms Policy, the OCAC has been authorised to notify a change in the price of petroleum products on a fortnightly basis since July 1, 2001 in accordance with the pricing formula approved by the Government of Pakistan.
The committee ''calculates'' the prices as per the formula provided by the Petroleum Ministry and dully approved by the Economic Co-ordination Council (ECC), which is auditable at the end of each year.
Earlier, briefing the newsmen, OCAC Secretary General Abid Saeed Ibrahim said that Pakistan imports 85 percent of its crude oil from Saudi Arabia, the UAE, Qatar and Iran at the prices prevalent in the Arab Gulf market and no preferential prices are being given on the import of crude oil to Pakistan.
PSO, Shell and Caltex import balance deficit of four million tonnes of high-speed diesel (HSD) at competitive prices, he said, adding that the crude oil has been imported based on an import parity formula, which is followed by many countries internationally.
There are various reasons that pushed the oil prices upward in the international market, including the United States economic recovery, high economic growth in China and India, production capacity constraints, seasonally, production control by oil producing countries and fear of calamities.
The prices are based on the price in the Arab Gulf crude market and not Western Texas Intermediate (WTI) or European (Brent) as understood by some, which are internationally considered as benchmarks.
Furthermore, the prices of petroleum are fixed and announced under The Petroleum Products (Petroleum Development Levy) Ordinance, 1961.
The price variations in the Arab Gulf market tend to have major impacts on the price of POL products in Pakistan. Taxes and other government levies such as Petroleum Development Levy (PDL) have similar effects on the same and these are determined and advised by the government itself.
Since May 2004, the prices of diesel in the Arab Gulf market have increased by over 90 percent, whereas the increase for the same in Pakistan was only 53 percent. Similarly, the full impact of increase in the prices of kerosene and petrol was subsidised by the government over the year-and-a-half by reducing the government levies and through the OMC who still owed Rs 6.5 billion in price differential claims.