Oil price cartel

Editorial
THE price of petrol was increased to its current (highest-ever) level on Sept. 30. At that time, the reason given by the Oil Companies Advisory Committee (OCAC) as well as the government was that world oil prices were at their highest levels ever — over $70 a barrel. The petroleum secretary had defended the hike by saying that had this not been done, the government would have had to pay Rs 1.2 billion to the oil companies because of the differential caused by rising world oil prices. He had also said that the government had paid Rs 10.5 billion since July 1, 2005, to the oil companies under this head. The fact is that the OCAC has representation only from the four oil marketing companies and various refineries but none from the government or those representing the interests of consumers. That probably explains why increases in world oil prices are usually passed on to the public whereas the benefit of a fall is rarely transferred to consumers.This is unthinkable in most other countries where due care is taken to protect consumer interests. Such cartels are deemed illegal in many developing countries for the simple reason that the public interest is seriously compromised if the companies are allowed to set the prices of the products that they sell. The profit motive drives the corporate sector, and profits come at the expense of the consumers, especially monopoly or cartel power as is found in Pakistan’s oil marketing sector. So, to allow the OCAC to set oil prices was a bad decision, one which has, by the government’s own admission, cost it several billion rupees, and also hurt millions of ordinary Pakistanis. In any case, in the presence of the industry regulator, OGRA, there is no justification to allow the OCAC to continue to set oil prices. Dawn