EDITORIAL: So what is new about oil marketing companies (OMCs) not maintaining mandatory stockpiles in anticipation of a fall in the price of petroleum to protect their own inventories from value erosion? This is a regulated sector, after all, and the law states very clearly that they must maintain a 21-day cover at all times, regardless of peace or war. And it's not as if this problem suddenly appeared over the last few days. However, what is surprising is that according to Oil & Gas Regulatory Authority's (Ogra's) list of six errant OMCs responsible for this shortage are all the big players barring Pakistan State Oil. The matter has been in the press since at least early April, in the thick of the wheat harvesting season, when the government was pressing Ogra to take action against OMCs because they were not lifting petroleum products from refineries, threatening serious supply bottlenecks. Then, as now, most of the 33 that operate in the country were not keeping the mandatory inventories of products out of fear of inventory losses in the face of lower sales and depressed prices. Things finally came to a head earlier this week as smaller than required stockpiles were exhausted in just the first two days of the month, after the price revision, and pumps were unable to provide any fuel to the public in a number of cities making a mockery of passing on the benefit of low prices in the international market to the people.
Now that what almost always happens has been allowed to happen again, perhaps some relevant government department should answer some rather important questions, at least from the public's point of view. It is pretty clear, for example, that this particular disaster was just waiting to happen since at least a few days before the Eid holidays. And while Ogra did approach the OMCs regarding what was effectively a violation of the law on the latter's part since the mandatory stock was not being maintained, why was the regulator so helpless when the marketing companies simply refused to follow its orders? And how come all the Petroleum Division could do about the matter was try and get the ECC (Economic Coordination Committee) of the cabinet to keep prices unchanged and not, contrary to the government's wishes, pass any benefit onto local consumers? Its reasoning, too, was that OMC stocks were abnormally low and pushing the price down would create major supply disruptions, and that the oil industry should be allowed to make up for some of its losses, etc. It's as if nobody thought that letting stockpiles stay so low for so long was so serious an offence that some high-level inquiries should be initiated.
Such handling of one of the economy's most important sectors, particularly the way in which the supply chain is being managed, would be unacceptable in the best of times for a government staking its reputation on the matter of transparency. And these are not good times by any stretch of the imagination. The coronavirus pandemic, the lockdown, and everything else that has hurt the economy over the last few months has already severely upset supply lines of some of the most important commodities. The last thing anybody needs is more problems just because of the self-interest of licensed players within a highly regulated sector and downright inefficiency and incompetence in government departments. The government must make sure all such irregularities, which cause needless demand-supply issues, are resolved once and for all. Nobody needs reminding that POL products, primarily because they power transport, affect all other economic activities as well. Ogra, being the regulator, was responsible for keeping OMCs in line. Since it was unable to do so, it must now answer to a higher authority; one preferably with the power to fix the whole mess. The ECC should already have done something about it when it was requested to keep the price unchanged at the last minute to protect supplies. Now that it has seen the results of earlier inaction, it should finally take whatever steps are necessary to make sure such a thing never happens again.