Strategies to Deregulate the Downstream Petroleum Sector of Pakistan

Muhammad Irshad, Mudasser Khan, Ather Akhlaq and Munir Hussain

Journal of Economic Impact, 2022, vol. 4, issue 1, 122-131

Abstract: Oil products play a dynamic role in the overall energy domain because it supports country-wide transport, industries, and households. The oil market in most countries is deregulated and provides free access to every organization or independent player. Some of them have followed this policy from the very beginning, while others have followed the strategy regarding deregulation at a later stage. In Pakistan, there is a usual tug of war between Government authorities and Oil Marketing Companies (OMCs) concerning the decision of setting oil prices. This exploratory study aims to assess the prospects of deregulation of oil prices from the point of view of stockholders from the Oil Marketing Companies (OMCs). Data is gathered through interviews from the professional stakeholders who are working in the supply chain department in the downstream petroleum sector of Pakistan, and a thematic analysis method was used to analyze the data. As per the data obtained from the interviewees, there are both advantages and disadvantages of deregulation of petroleum. Advantages are like low prices of petroleum products, positive impact on the economy, opportunities for new entrants, and creation of new jobs. While the disadvantages are oligopoly created by the mafias, failure of the system, dumping of fuel, and increase in cross border smuggling. While the major barriers to deregulation are the Oil and Gas Regulatory Authority (OGRA) and political forces, and the facilitators for the deregulation are foreign direct investment and high tax collection of the Government. The deregulation must be done immediately to pass on the benefits of reduced and appropriate prices of petroleum products besides their availability in every city of the country. Government should also promote bulk import and storage of petroleum products so that the companies get possible economic ordering benefits of low prices.

Keywords: Petroleum sector; Deregulation; Fuel prices; Diesel; Petrol (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:adx:journl:v:4:y:2022:i:1:p:122-131

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