Multi-Dimensional Effect of Oil Pricing On Pakistan Economy: A Case of Study

Abstract

Pakistan economy is growing steadily. This growth demands higher energy consumption and consequently putting high pressure on countries economy. Pakistan mainly depends upon oil and gas resources to fulfill energy requirements. Indigenous resources of Oil are not enough to quench energy thirst of the growing economy. As a result Pakistan has to import large quantity of oil and oil based products from Middle East countries. Gas reserves in the country are enough for current gas requirements. So natural gas is playing a key role in power sector. Currently in oil upstream and downstream sector there are some local and international companies involved and government of Pakistan is establishing such policies that it can attract more international investors in this sector but the rapid pace of change, high degree of uncertainty and unstable political situation of the country present significant challenges and risk to foreign investment. The paper is a review of possible consequences and challenges presented by high oil prices in Pakistan. Pakistan is heavily dependent on imported fuels and this dependence is expected to increase even further in future given the depleting gas resources. The rising oil prices in the international market has had affected negatively balance of payment position as well as on the budgetary position of the country and contributed in creating inflationary pressures in the economy. For long run development oil will remain an important source of energy. The government should chalk out strategies for ensuring efficiency in use; and development, adequacy and reliability of supply and the pricing of petroleum products in such a way that will not create extra burden on the consumers. Unless appropriate steps are taken this trend of rising oil prices will further aggravate the negative impacts on the economy.