This is not just my story, but that of every citizen in the country who has become exhausted from bearing the burden of expensive petrol and diesel. Yet while ordinary Pakistanis were emptying their pockets and struggling to afford every litre of petrol, the offices of the country’s oil refineries and fuel companies were celebrating the joy of earning higher profits.
The surprising thing is that while life was becoming miserable for ordinary people, the profits of Pakistan’s major refineries recorded a significant increase of more than 1,000 per cent during the same period. It all began when the war between the United States and Israel against Iran, along with disruptions in the Strait of Hormuz, pushed crude oil prices up in the global market. When a route carrying 20 per cent of the world’s oil supply was blocked, the prices of crude oil and petroleum products rose rapidly in international markets.
In Pakistan, the impact was such that petrol, which had been available for Rs276, suddenly approached Rs400 per litre. The inflation rate rose from 7 per cent to 11 per cent, and the government began changing prices on a daily basis. But the real turning point came when the companies’ financial reports were released.
Attock Refinery, which earned Rs1.45 billion in the July-to-September quarter last year, saw its net profit rise to Rs18.65 billion. That was an increase of 1,184 per cent in one year!
National Refinery’s profit jumped from Rs1.03 billion to Rs11.57 billion, an increase of 1,029 per cent, while Pakistan Refinery’s profit rose from Rs1.02 billion to Rs13.97 billion, an increase of 1,274 per cent. Not only that, oil exploration company Pakistan Oilfields and Attock Petroleum also earned 51 per cent and 74 per cent higher profits, respectively.
On one side, the buyer was crying, while on the other, the seller was collecting billions. How did this happen?
According to energy experts, there were three major reasons behind these extraordinary profits.
The biggest reason was the “crack spread”, meaning the difference between the price of crude oil and the price of refined petrol. Before the war, refinery margins were between $12 and $15 per barrel, but after the war, margins on diesel rose to as much as $50 per barrel. In other words, as crude oil became more expensive, refined petrol and diesel were sold at even higher prices.
The second reason was “inventory gains”. The stocks of products that companies had purchased at lower prices suddenly began selling at much higher prices as soon as market rates increased.
The third reason was the global supply chain crisis. Supplies of refined diesel from Gulf countries were disrupted, making diesel more expensive worldwide. Local refineries benefited fully from this because they were importing crude oil and refining it themselves.
Although the government attempted to show action by setting a cap of $41.89 per barrel and later $38 per barrel on diesel profits, and the weekly petrol relief package of Rs500 can be credited to the government, even this limited relief did not properly reach the public. The truth, however, is that throughout this crisis, the state remained a silent spectator instead of standing with its people.
The real questions concern the government’s policies and intentions. On one hand, private companies were given a free hand to earn historic profits under the pretext of a global crisis, while on the other, the government itself left no stone unturned in burdening the public through petroleum levies and harsh taxes.
Even when international prices were soaring, the government did not consider offering even a one-rupee reduction in the petroleum levy. Instead, it continued collecting heavy levies on every litre to cover its fiscal deficits.
What kind of people’s government is this, one that turns a blind eye to billions of rupees in corporate profits while imposing a mountain of levies and taxes on the poor and middle class?
For the public, the petroleum levy became an additional burden that left them with no room to breathe. The government could have provided relief by reducing its taxes and levies, but the rulers chose to fill their own coffers over public interest. As a result, oil companies continued smiling as they earned billions in profits, the government slept peacefully after collecting its taxes, and the only ones left suffering were ordinary Pakistanis, whose pockets were empty and whose cooking fires had gone cold.
Written by: By Fahad Ali Khan
Note: The views expressed by the blogger are personal and do not necessarily reflect the views of the institution. — Editor
