Recently many news sources and websites have reported that Government of Pakistan is considering deregulation of Petrol and Diesel prices. In fact the date that is set for deregulation is November 1, 2022. This will mean that Oil Marketing Companies (OMCs) like Shell, PSO, Total, Attock Petroleum and all others will be able to set Petroleum Product prices themselves. As for now Govt of Pakistan sets the prices of Petrol and High Speed Diesel etc. After prices are deregulated all OMCs including the Govt’s own Pakistan State Oil (PSO) will themselves set the petrol prices.
Currently a Government owned Petroleum Regulatory Body called “Oil and Gas Regulatory Authority (OGRA)” sets the prices of major petroleum products specially Petrol and High Speed Diesel. In turn they set the margin of OMCs in per litre price. For now OGRA will be responsible to set these prices and margin of OMCs until October 31st 2022. After that when prices are deregulated, the margin of OMCs will be set by the market, means the prices are set by the competition and whatever price and OMC will set for sale, they will have to include their own margin in it.
The final outcome will be visible after seeing on what terms and policies Govt deregulates these prices but this could go right or wrong in so many ways. One hope people may have in it, that oil marketing companies will go into competition and this competition will result in lowering of prices. This may very well be the outcome. However, other side of the coin here could be, these marketing companies may end up making a cartel and coming on some kind of terms with each other. Than this will allow them to sell the products on prices higher than a certain price they have set and manipulate the market and people on same time.
However, if we see the bright side, Govt of Pakistan also have some tricks up its sleeves. One of them is a department or body called “Competition Commission of Pakistan (CCP)”. CCP is an independent Govt body to keep an eye on different companies in all different industries to make sure, someone does not use their dominant position against overall companies economy or against each other. One of their responsibility is to stop companies from joining to reduce competition etc. So, this will serve as huge tool against any such efforts to make any cartel in petroleum industry. Again here, one could think that corruption and negligence are biggest issue of Pakistan, what if Petroleum stakeholders are able to manipulate CCP or CCP is not able to take notice, well that will be a possible problem them and for now its just hypothetical scenario. But for now hopes are there in form of CCP. And honestly, me not being an expert on these matters of competition between companies, I can only just speculate.
Another concern I had, purely as consumer of these products, specially Petrol, deregulation may mean that some company may be selling Petrol or any fuel for that matter on lower price but lower quality or lower RON number. So solution to this could be that while deregulating prices, govt also introduces a policy which ensures that these OMCs, oil refineries and all stakeholder of petroleum industry are required to maintain certain level of quality, for example a minimum RON number in case of petrol and certain other standards regarding emissions and other considerations etc. Here, again Govt of Pakistan may be working on these issues already and may come up on due date with a complete and comprehensive policy but a lot of times in our country many important things are sometimes just overlooked, so i am obviously concerned due to very this fact.