it is about oil prices increase and its impact on pakistan economic conditions

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2. Hike in Petroleum Prices and its impact
on Pakistan’s Economy
By.
Hafiz Anees ur Rehman(PMS)
DS:Mr. Shahzad Ahmad Malik
Date.
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3. Scope of the Topic
•Pakistan is not oil producing rather oil-importing
country.
•Oil prices are always an important variable in
determining the economic activity of any country.
• The Pakistan’s economy has been hit hard by a
sudden jump in oil prices recently.
•The continuous increase in the price of oil is
making new records every next day.
•Uncontrolled increase of dollar.
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4. Statement of the Problems
• Crude Oil Costs.
• Depreciation of the currency
• Supply and Demand. ...
• Increase in the fares
• Conversion of Power generation plants to furnace oil
plants.
• Seasonal Demands. ...
• The Weather. ...
• Natural Disasters and Politics. ...
• Neighborhood and Defence Matters.
• Pandemic of Corona 4

5. What is price hike?
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A hike is a sudden or large or abnormal
increase in prices, rates, taxes etc which puts
the society in economic quagmire.

6. How prices are regulated
In Pakistan, the petrol price is regulated by the
government, and the price is notified through the
Oil and Gas Regulatory Authority (OGRA) on a
monthly or fortnightly basis.
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7. Major Usage of Oil
Transport
Industries
Power Generation
others
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8. Share of Oil Usage in different sectors
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9. Rates of POL in Different Countries.
No COUNTRY RATE IN US $
1 Japan 1.37
2 USA 0.90
3 Saudia 0.62
4 Bangla Desh 1.05
5 Turkey 0.89
6 Iran 0.07
7 Iraq 0.52
8 India 1.34
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10. Reasons
•The primary reason for price hike were the increase
in demand globally.
•The geo political conditions in different regions also
aggravated the situation.
•The continual depreciation of our currency against
the Dollar during the last few months.
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11. Reasons - Continued
• This crisis of oil also stems from a new mode of power
generation initiated two decades ago, when power generation
came to rely more on imported furnace oil than hydropower.
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12. Reasons - Continued
•Fast increase in population, which ultimately
increase the demand for energy petroleum products.
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13. Reasons - Continued
•Exorbitant Rise in international market due to
speculative sort of trading.
•Consumption of kerosene oil, diesel oil and
petroleum products at household level also
increased.
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14. Corona Factor
•The one of the factors in rapid fluctuations of oil
prices is the spread of Corona which internationally
impaired the global economy.
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15. Impact on Economy
 Rising fuel prices lead to higher inflation.
 It affects prices of other essential goods. The
value of essential commodities like food ,
vegetables, milk, medicines and other edible
items etc have been adversely affected by a steep
rise in fuel prices.
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16. Impact - Continued
 Whatever is earned by the exports, is squandered
by the import of oil.
 Banking sector is also expected to suffer due to
high inflation.
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17. IMPACT Continued
•Rising prices of oil and its repercussions are the
largest single drain on Pakistan’s economy.
•Historically Pakistan has remained a net importer of
crude oil and petroleum products.
• The rising trend in international oil prices may
corrode country’s paltry foreign exchange reserves.
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18. Impact on Daily Life
 Petrol hike directly or indirectly
affects all the major sectors like
transportation, textiles, auto, etc, for
manufacturing & transportation.
 This affects the prices of daily essential
commodities which are transported on a
daily basis.
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19. IMPACT Continued
•Another result of oil prices is the increase in cost of
production that could land Pakistani exporters in
trouble in the global markets.
•The fares of transport sector will go up which will
affect every segment of the society.
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20. IMPACT - Continued
•Many industrial chemicals are refined from oil,
lower oil prices benefit the manufacturing sector.
•The unprecedented fuel inflation has been a key
factor in the 36% increase in Pakistan’s import bill.
Source SBP.
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21. Impact - Continued
•The economic conditions of the country get
deteriorated due to severe economic slump resulting
in high pruning of the employed staff by the
industries.
• The continuous increase in the international oil
prices had affected negatively the BOP (balance of
payment) and the budgetary position of Pakistan
which added inflationary pressures on the economy.
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22. IMPACT - Continued
Electricity Cost will go up.
Highly indebted country like Pakistan cannot bear
the brunt of Oil escalation jerks.
The increase in oil price led to a decline in GDP.
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23. IMPACT ON AGRICULTURE
•62% of the population resides in rural areas which
has direct or indirect link with agriculture for their
livelihood.
•It contributes 18.9 percent to GDP and absorbs 42.3
percent of labour force.
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24. Impact on Agriculture Continued
•Latest machinery like tractors thrashers harvesters
depend upon the fuels like petrol diesels etc.
•Rising prices of oil will make Agri products more
expensive and may have negative ramifications for
Agri products.
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25. IMPACT ON AGRICULTURE - Continued
•The Agri productivity may lessen resulting in
aggravating economic crisis further.
•There will be lesser export of vegetables rice fruits
etc which is not conducive for foreign exchange
reserves.
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26. Oil Prices and Inflation
Oil price increase inflation and reduce economic
growth. Oil prices directly affect the prices of goods
made with petroleum products.
Increases in oil prices can depress the supply of
other goods because they increase the costs of
producing them.
Oil prices are closely linked to inflation. This is
because oil has a multiplier effect as it circulates
through markets.
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27. Oil Prices and Unemployment
• Increase in oil prices leads to unemployment. The
unemployed labor has nearly zero purchasing power.
• Unemployment is one of the important macroeconomic
issues that all governments and economies face. It has both
social and economic implications for all economies.
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28. Impact on Auto Mobile Industry
• The rise in price of petrol would decrease the demand for
cars.
• Furthermore, the increasing of petrol price also will affect
the investment of government in public transport.
• Rising fuel prices will have a negative impact on the
automobile industry, hitting vehicle demand.
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29. Macro Economic Effects
 Higher oil prices affect a Macro economy through
various channels.
Higher oil prices will increase Pakistan's import bill
and increased petroleum prices will intensify
inflationary pressures.
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30. Macro Economic Effects - Continued
 Oil price increase leads to a transfer of income from
importing to exporting countries.
 It changes the balance of trade between countries
and exchange rates.
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31. Price of POL at the time of Independence
It will be interesting that one litre of petrol costs Rs
147.85, But in 1947, the same quantity was available
for just 27 paise. An Air ticket from Karachi to
Mumbai would cost around Rs 140 at the time of
independence due to very low price of petrol prices.
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32. Oil production and consumption summary
Barrels Global Rank
Oil Reserves 353,500,000 52nd in the world
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Barrels per Day Global Rank
Oil Production 88,262 53rd in the world
Oil Consumption 556,000 33rd in the world
Daily Deficit -467,738
Oil Imports 140,097
Oil Exports 4,896
Net Imports 135,201

33. Pakistan’s Export of Oil
 Pakistan earned 280 M $ in the 2019 from export of
refined oil.
The main destination of Refined Petroleum exports
are:
“ South Korea (156 $M), Afghanistan (61.3 $M),
Chinese Taipei (12.8 $M), United Arab Emirates
(11.7 $M), and Malaysia (10.1 $M)”
 https://oec.world/en/profile/bilateralproduct
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34. Way Forward – Oil Imports
•Almost 82 per cent of the demand for petroleum
products in the country is met through imports.
•The top partner countries from which Pakistan
Imports Fuels include United Arab Emirates,
Qatar, Saudi Arabia, South Africa and Kuwait.
• Pakistan spent almost 57 per cent of export earnings
on oil imports.
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35. Way Forward
•Indigenous production of oil may be enhanced by
exploring and digging new areas.
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36. Way Forward - Continue
The public transport system be improved so that
people may be encouraged to use metro instead of
using personal vehicles.
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37. Way Forward - Continued
For power Generation
i. Solar System
ii. Hydro power plants be installed
iii. Construction of new dams
as it will lessen the usage of furnace oil for power
generation.
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38. Oil share in Power Generation
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39. Way Forward - Advent of Electric Vehicles
Era
•American CIA has predicted that the world is on the
threshold of the advent of a new era of electric
locomotives and by 2025 more than 90% of the
vehicles would have been converted into electricity
vehicles.
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40. Solar Power System be Introduced
The Govt offices and schools / colleges which are most
of the times functional during the day time may be converted
to Solar power generation system. In this way much of the
power/energy may be conserved as the most of the power
generation plants are being run by the costly furnace oil.
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41. Way Forward – Oil Refineries
• Relevant authority should check the undue profits
of oil refineries.
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42. Way Forward - Continued
•Pakistan is an Agricultural country and has a
strong potential to produce energy through
biomass and Agri waste.
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43. Ask Me?????????
Thanks
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