THE economy appears to be taking a nosedive in the wake of a new wave of rising oil and gas rates in the country. The price of gas has now gone up by 31 percent. One kg of CNG now costs Rs 51. This comes just on the heels of OGRA's decision to jack up the prices of various petroleum products. However, before one takes stock of the government's policy in this regard, it would be only fair to take an overview of the global trends in the energy market and its consequences on Pakistan. Since the CNG industry is inextricably linked to that of oil, the recent surge could be ascribed to the soaring price of crude. And since Iraq had the third largest proven oil reserves, the war had badly affected its ability to provide oil to consumers worldwide. The rapidly growing economic engine of China is cited as another element that has further widened the gap between demand and supply. Despite Saudi Arabia agreeing to make an increase of 200,000 barrels per day in its production, OPEC seems unable to bring the situation back to normal. So how are we to cope with this dismal scenario? The inflationary spiral, the growing fiscal deficit and the sinking forex reserves are just a few of the causes responsible for the present state of affairs. Making any further increase in the subsidies might, therefore, be difficult. During the past fiscal year, the government spent $2.4 billion on petroleum subsidies, yet that could not bring down prices. On the other hand it added to the budget deficit. What is required from the government at present? A few simple methods. It must cut down on expenditures and practice austerity measures. Also, the IPI project could be a big help. Other than that the government would have to begin work to exploit the Thar coal reserves, which according to some estimates are equal to the energy reserves of the Saudi Kingdom and Iran put together. Prime Minister Yousuf Raza Gilani must be aware of this fact when he made it known that his government was interested in the venture. One hopes that the project would come on steam soon.