Another oil saga in the making

As if the Arab unrest was not creating enough ripples in the international market, the quake in Japan has added fuel to fire; oil prices are now expected to touch new highs, even all-time highs.
The initial knee-jerk reaction of the oil market over Japans disastrous Tsunami was of panic, as everybody thought a disaster of such magnitude would result in a slowdown in oil demand - which resulted in a $6/bbl fall in a single trading session.
But realisation hit soon as oil prices started creeping up right after the quake-affected Japans nuclear energy plants.
Japan happens to be the worlds third largest producer of nuclear electricity that has nearly 30 percent share in the total electric generation. Initial estimates reveal that the quake will result in disruption of at least 12000 MW of electricity generated from the nuclear plants - most of which is a permanent loss.
It seems that Japan is hird everywhere from being the third largest world economy to being the third largest oil consumer and third largest oil importer in the world. So, the loss in nuclear is gain for oil.
According to EIA estimates, Japan will require an additional 400,000 barrels per day throughout the summer and later on, to make up for the nuclear electricity generation loss.
The additional fuel oil requirements make up 10 percent of Japans total oil consumption - which is enough to create doubts in the international market that is already facing fears of disrupted supply amid the Arab unrest.
And the uptick in oil demand is expected to continue for a long period as nuclear energy plants would require plenty of time to start generating electricity again.
The quake has also affected some coal based electricity plants of 2000 MW capacity - the burden of which will also fall on thermal based plants - hence more oil imports and upward pressure on international oil prices.
Russian Finance Minister Alexei Kudrins comments on the Japan crisis have also sparked speculation, as he sees the oil prices crossing $150/bbl and even touching $200/bbl in the short term. A lot will also depend on how things turn out in Bahrain and the utilisation of the much-talked Saudi oil reserves.
In other words, oil users in Pakistan should expect further hike in petrol and diesel, even if the government provides a part cushion, as it is doing at the moment. And in case, it fixes the prices completely, then expect more fiscal troubles. Either ways, trouble is on the cards.