Wednesday, 02 September 2015
The minister for Petroleum and Natural Resources, Shahid Khaqan Abbasi, announced an increase of up to 38.5 percent in domestic gas prices and a cut of 3 rupee per litre in petrol/diesel prices. Economists would, no doubt, support the trend though there would be arguments on the actual rate rise/decline announced by the minister and notified by Oil and Gas Regulatory Authority (Ogra). While the general public may well lament the rise in gas prices, with special reference to the price of CNG, and base their argument on the low cost of domestic gas extraction/supply relative to imported fuels yet this viewpoint ignores two economic factors. First and foremost, economists are agreed that all types of fuel in an economy must be priced equally and according to their calorific value (British thermal unit) or any other approved measure of unit of energy per unit of each fuel. Any discrepancy in price between domestic gas and other fuels raises the demand of the cheaper fuel thereby generating shortages which other more expensive fuels would have to meet. Gas shortages in Pakistan are now a permanent feature throughout the year and the government has been struggling to price it at par with the prices of the more expensive imported fuels.