ISLAMABAD: The Oil and Gas Regulatory Authority (OGRA) has recommended to the government to make a big cut in oil prices, hinting that in the international market its prices may go further down in the wake of increased oil supply, as Iran is also going to join the international market after lifting of sanctions on it.
The authority has recommended Rs7.56 per litre reduction in petrol which is widely used in cars and motorcycles owned by middle class commuters. The price of high-speeddiesel (HSD), mostly used in mass transportation and agriculture, could also be cut by Rs11 per litre (13.6 per cent). The price of light diesel oil (LDO), an industrial fuel, may be cut down by Rs8.17 per litre.
A senior official said that the authority had recommended this reduction to the government on the basis of strong prospects of further reduction in crude oil prices after Tehran’s inclusion in already oversupplied market.
OGRA has sent the recommendations to the Petroleum Ministry that has proposed comparatively a bigger slash in the prices of petrol, diesel, high-octane blended component (HOBC) and kerosene. These recommendations will be forwarded to the PM office for approval on Friday.
It is worth mentioning that in the international market, the crude oil price has been cut roughly by more than 60 percent since June 2014.The official, while explaining the reason behind the falling prices, said that the US domestic production had nearly doubled over the past several years, and Saudi, Nigerian and Algerian oil that was sold in the US, was now competing for the Asian market and as a result the prices dropped. Canadian and Iraqi oil production is rising, while Russia is also managing to keep pumping more oil.
Investment in the petroleum exploration and production (E&P) has also reduced and various companies have stopped their operations and as a result production in the US and other producing countries has gone down. But the pace of production is much higher than stoppage of investment for E&P in the sector, especially with output from deep waters off the Gulf of Mexico and Canada continuing to build as new projects come online.
