See-saw oil prices

IF you`re feeling a little seasick these days, it`s alright. So is the rest of Pakistan. The constant up and down in oil prices over the past couple of months has everyone feeling a little queasy. It`s true that global oil prices have risen in the month of July, although the last week has seen them turn downwards slightly. When prices at the pump are linked to global prices there will understandably be some amount of up and down movement as a routine matter. But lately the adjustments have been substantial, with the latest one seeing large rises in all categories of fuels.

The change would be easier to digest if the oil pricing mechanism were a little more transparent.

Unhappily, that comfort isn`t available. Oil prices at the pump have a number of different components, including items such as the margin allowed to the dealer, sales tax and a special levy charged only on petroleum products. Each one ofthese components sees furious lobbying around it by specialised interests.

The finance ministry is reluctant to adjust the levy or grant any sales tax exemptions in an effort to keep prices stable. It`s difficult to blame them entirely: in the present climate, where tax reforms are stalled, oil prices are important revenue lines for the government. The oil marketing companies lobby hard around the inland freight equalisation margin and the dealer margins, since this is where they earn their profits. What consumers would like to be reassured on is this: is the recent volatility in oil prices really the result of global price hikes or is it being driven by the give and take between the various stakeholders in the price, such as the ministries of petroleum and finance and the oil companies? Lack of transparency on this important point will have consumers here feeling a little queasy in the meantime.