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Effects Of Covid-19 On the Pakistani Oil Industry

Where there was a briskness in all fields of life, now only left with a cacophony of sounds – moans, groans, and, raspy coughs due to COVID-19 outbreak which proved catastrophic for health as well as global economy. The world was a hive of activity until this. Everything was in its place and there was no threat to life or economy. It was a good time

A country’s economy depends on its industries, how effectively they are working in order to establish stability. There are several industries in Pakistan including; mining, infrastructure, private sector and many others. One of these industries is oil/petroleum industry. The initiative behind mentioning this, is COVID-19 which is defined as one of the worst viruses and how it has affected everything. The rapid growth of COVID-19 since 2019 has affected numerous sectors including Oil Industry and as a matter of fact, the drastic drop in oil prices has left it concerned. Oil is considered to be one of the valuable commodities and its jeopardy would result in severe loss if not protected or utilized.

Talking about global economy which is disrupted for a long time now, China, being one of the world’s biggest crude importers has faced calamities in oil sector. China used approximately a million barrels of jet fuel a day which was used mostly in international flights. It is now affected because of the outbreak. The outbreak hit Pakistan months later than it already had struck other parts of the world which means they have been on the verge of catastrophe for a little longer than Pakistan. Though 2020 is labeled as a year that is considered to be a downfall for worldwide economy as there was no work done because of global pandemic.

The threat tourism had due to COVID-19 resulted in acute loss as the demand of fuel for jets declined because of no international flights. People stayed in doors for a long period of time which means no transportation, construction, and the factories remained shut. As an effect there was a change in the growth of manufacturing sector. This continued for some times as more than two thirds of the world’s population were in lockdown and some of the countries still haven’t lifted the restrictions.

A sharp decrease in oil prices occurred in the October forecast and there was a 43% drop from the 2019 average of $61 prices per barrel.

On April 1, 2020, the price of Brent crude oil fell from $67 per barrel to $15 per barrel.

Pakistan being one of the developing countries could’ve benefited itself from the petroleum exporting countries who offered import of oil at an inexpensive cost as the prices slumped to -$37 per barrel for the first time in ages but it failed to do so. There wasn’t enough room to store oil, if there was, Pakistan would’ve imported it and sold it when the lockdown was eased. A possible outcome could’ve been the shortage of oil/petroleum whose results would be deadly, one of them being, no production of electricity but we should be grateful for how we didn’t experience any of this.

MD Muzammil Aslam said;

“Pakistan has not imported a single ship of oil in the past one month following the spillover of reservoirs amid a drastic drop in demand for petroleum products, particularly since the Sindh government imposed a lockdown on March 23 to contain the spread of coronavirus.”

Pakistan’s fiscal year of 2019/20 has seen a decline in oil consumption by 11 percent. Hamza Kamal who is an analyst at AKD at that time said;

“Prices of motor gasoline and diesel are bound to increase,” he said. “This, coupled with high taxes in the form of petroleum levy and high prices, will make a case for an influx of products from across the border once COVID-19-related restrictions on borders ease.”

The data from the oil company’s Advisory council showed that 16.36 million metric tons of oil is consumed in fiscal year 2019/20 whereas, 18.31 million Mt was the amount of oil consumed in the previous fiscal year. 9 percent to 6.452 million Mt was dropped for Diesel and 36 percent to 1.926 million Mt for furnace oil. There was also a time when there was a halt in the utilization of furnace oil. Apart from this, the decrease in international prices advantaged Pakistan in a way that its import bill fell by 25 percent to $4.74 billion.

The data from oil company’s Advisory council showed that 16.36 million metric tons of oil is consumed in fiscal year 2019/20 whereas, 18.31 million Mt was the amount of oil consumed in the previous fiscal year. 9 percent to 6.452 million Mt was dropped for Diesel and 36 percent to 1.926 million Mt for furnace oil. There was also a time when there was a halt in utilization of furnace oil. Apart from this, the decrease in international prices advantaged Pakistan in a way that its import bill fell by 25 percent to $4.74 billion.

In April, 2020, the largest plant, Attock Refinery in Islamabad was closed which produced 26,000 barrels of crude oil per day, leading to unemployment, as there was no working capital and support to those jobs, it’s sad how people lost their bread and butter. Lack of employment proves bad for a country’s reputation as it faces severe financial hardships, poverty – and therefore the country falls victim to debts and loans.

Coming back to the impacts of COVID-19 on Pakistan’s oil sector, it reduced oil prices using different methodologies. Furthermore, PSO, one of the oil marketing companies, instead of purchasing refined petroleum products from local refineries, imported it from oil exporting countries as it costs less. Moreover, GDP (Gross Domestic Product) in 2018 was around 5.8% which is now reduced to 0.98% due to this deadly outbreak.

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