The oil prices have dropped five-year low to less than $50 a barrel in the international market but several governments are encouraging their oil importing companies to hedge.The cut-rate sale of oil in global markets is impregnated with an element of uncertainty asoil prices fell 6 percent in a single day to their lowest since 2009.Fears of a supply glut have also deepened as the US crude crashed below $50 a barrel and benchmark Brent crude tumbled under $53.Pakistan is not ready to hedge its $14 billion oil import bill while Saudi Arabia has reduced the oil prices for US refineries and its oil minister claims that the kingdom will survive at the price of even $20 a barrel.
The officials of Pakistan State Oil are treading on a cautious path due to unpredictability of the oil prices.If the pricesfall below the hedged value, there will be a loss and no one will be happy to own its responsibility.The oil demand is weak and the euro’s tumble to 2006 lows. According to experts, the United States has played a major role in creating bearish trend in the oil market as decline in oil prices began due to oversupply of high quality US shale crude.Saudi Arabia has already ruled out cut in the oil production at a meeting of the Organisation of the Petroleum Exporting Countries.
On another note, Petroleum Minister ShahidKhaqanAbbasidenies any restrictionon oil import, saying the companies can hedge if they want to and the companies also have an option to buy dollar from open market to pay the oil bill.Meanwhile, the world energy data shows Russia’s oil output reached 10.58 million barrels per day whereas the Iraq’s oil exports remained at their highest since 1980 in December.
As a matter of fact, any change in oil prices brings positive or negative impact on macroeconomic variables as oil plays important role in economic setup of the country. The country’s economy has been under pressure for the last many years due to proportional increase of oil prices in the international market. It has also been noted that raise in oil prices increase inflation and budget deficit as well as affect every sphere of life in the modern economy. Many economies of the world are going well with fall in oil prices and Pakistan also has a good opportunity to draw maximum benefits from the situation.
