How Pakistan can combat the

How Pakistan can combat the financial waste of high oil import bill?

Abdus Saboor

Pakistan’s public is probably the most accustomed with power outages among all the nations of the world. It has taken decades for the power sector to confront this problem. Over the years, Pakistanis have increased at a rapid rate, from slightly over 100 million in 1990 to about 220 million in 2020, and accordingly an increase in urbanization and energy demands. However, in the past three decades, policy makers were outpaced by the increasing power demand as the primary energy production lagged behind the primary energy as well as economic growth. For this lag, no one but the governments are to be blamed for not devising a firm and stable policy to tackle it for once and all. The policies designed were either restricted to slogans, to achieve short term benefits, or thrown out with political intent.

Despite its potential and location in the Himalayan region, Pakistan has been unable to produce enough hydel energy- the cheapest source- and clearly not taking advantage from its geographic locality. Consequently, this disadvantage has forced Pakistan to go for other expensive options such as production from furnace oil, natural gas and coal. There is no doubt that energy is one of the most important contribution for the economic growth and sustain of industrial and commercial activities.

Due to the power outages and its expensive nature, the industrial and commercial sectors have resulted in limited growths. In addition, about thirty to forty million people lack access to electricity, which not only forcing them to live under-privileged livelihoods and affect social cohesion but also resulting in negligible and insignificant contribution in the national GDP.

Pakistan primarily depends on the expensive fraction- fossil fuels- for energy production and produces more than half of its energy need from them. Unlike the middle east and gulf countries, Pakistan is not self-sufficient in hydrocarbons and produces about ~95,000 barrels/day of oil against the consumption of 450,000 barrels/day. The tall consumption vs production ratio makes Pakistan unable to provide sufficient oil and gas to its consumers in residential, industrial and transportation sectors. As a result, Pakistan has no way but to import oil from international market thus putting a huge pressure on budgets and reserves. The rupee depreciation by 200% and high consumption of oil (due to low prices and overall reduction in CNG driven vehicles) in the past 8 years has further aggravated the oil import expenditures.

An increase in gas consumption, due to the combined effects of urbanization, transportation and power generation, has also outpaced the domestic gas production as well. The reduction in indigenous natural gas production urged Pakistan to import gas from its neighboring countries like Iran and Turkmenistan. The high oil import bill (US$ 16 billion in 2019-20) coupled with use of oil and gas in power generation has a profound effect on the national exchequer. Miracles aside, but it will take a long time for Pakistan to be autonomous in exploration and production of hydrocarbons.

However, the last few years of the previous as well as present government has been optimistic for Pakistan in terms of catering power needs and there is no doubt that CPEC is one of the main driving forces behind it. The completion of the power projects in near future will relieve Pakistan from a significant financial burden and till the country is self-sufficient in indigenous production of electricity, it can adopt the policy of China to swiftly combat the oil import bill.

Peoples Republic of China is the largest importer of oil in the world as its indigenous resources are unable to provide fuel to ~1.4 billion people. However, unlike Pakistan, China is producing enormous amount of electricity from its indigenous resources of coal, water, wind and sun. In such a circumstance, it does not have a need to import oil for power generation purpose and ‘waste’ money on it. Due to a rise in international pressure, regarding vast emissions of greenhouse gases, China has reduced the proportion of coal generated electricity, but it is still the leading producer of electricity in the world. The world environmental protection agency is concerned about the vast emissions of greenhouse gases from China into the atmosphere owing to its high rates of urbanization and industrialization.

Despite its giant nature in international politics and robust economy, China reduced its dependency on oil and, in a positive, it has further restricted its oil import bill.  China has successfully managed to reduce its reliance on fossil fuels by introducing the electric run vehicles long ago and is currently in a mature stage. These include the electric run trains, public transport buses, cars and many variants of two-wheeled and three-wheeled vehicles. Though Chinese people prefer bicycles for short distances, in modern day urbanized China there are tens of millions of electric vehicles which not only are environmentally protective but also has a high share in the national GDP and save a handsome amount of money.

Pakistan is the fifth populous country of the world but unfortunately its electric vehicles industry is not even in infant stages and it will still take quite some time to start, grow and reach to a mature stage. If it has a ‘significant’ start now, by the time Pakistan is self-reliant in power sector, its electric vehicle industry will be in a ‘decent’ progress stage, thereby further reducing the financial burden of gasoline import. However, in the same time, it is dreadful to think that when the world environmental protection agency would restrict the production of power generation from fossil fuels and a large chunk of gasoline run vehicles. In order to prepare for such a scenario, Pakistan should devise a strategy, re-think over the distribution and use of fossil fuels- the quicker, the better.

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