The horrors of high oil price

Global oil prices have surprised many around the world. The way they have jumped in just a weeks time reminds people of the high volatile days of October-December 2008. In fact, the massive jump from $77/bbl to $86.6/bbl in international crude oil price is the highest intra-week volatility ever since October 2008, when the massive slide started.
There are contrasting views among the energy experts whether or not the rally will continue to the $100/bbl mark. The chances of oil prices stretching further towards $100/bbl have gained substance after the hopes of US recovery have picked up sharply.
The US employment figures which have kept the oil prices in check previously, have registered a three-year high number of 162,000 jobs created in March alone. Both the US manufacturing and service sector have grown at a more rapid pace than expected, paving the way for a double-digit growth in home sales in the US.
Chinas ever improving manufacturing statistics also played their part in escalating the oil prices. Moreover, Americas resurgence means good days ahead for the Chinese manufacturers; hence, increased demand for oil is very much in the offing from the Asian giant.
The surge in oil prices might be good for a handful of investors and a few companies listed at the KSE. The oil exploration and marketing companies would not mind oil approaching the $100/bbl barrier, as it would offer some respite to the cash starved companies through inventory gains reaped out of volatility.
Even if the oil prices are to stay where they are for the rest of the month, it is a bad news for the masses of the country. Not only will it result in substantial increase in prices of petroleum products, but the trickledown effect would also lead to widespread inflation in essential commodity items.
An increase of huge magnitude in petroleum prices, especially diesel prices could also hurt governments targeted revenues through the Petroleum Levy - something which the government can ill afford at the moment.
Increased oil prices will also lead to the government facing the tough question of passing on the impact of fuel prices through the Fuel Price Adjustment under the IMF programme. Bear in mind that power consumers show elastic behaviour and the idea to increase the power tariffs any further may hit back the government.
Worse still, is the timing of the oil price surge, summers are fast approaching in Pakistan, which means more furnace oil demand from the power sector. The circular debt hit E&P companies are producing less oil which obviously leads to higher imports at high prices.
The current account deficit is sure to suffer in more than one manner as the currency may also depreciate steeply following the dollar payments of imported fuel. Perhaps the only respite may be believing the pessimists in the scenario who think that the oil price will shortly be back to $80/bbl, which happens to be its base for a long time now.