The sudden and historic drop in US crude oil prices on Monday sent shockwaves through the world and with good reason. For parts of the day, the price went below zero, prompting many to speculate that this all-time record was yet another sign of the disastrous state of the global economy. The value per barrel later rebounded, but the causes for this latest hit to the economy are clear; the supply of oil is consistent, while the current demand in the world is way below the production capacities of the oil industry. With international oil companies trying to fill every nook and cranny of available space – down to filling pipelines and then shutting them off when they reached capacity – it is time to take stock of how we can benefit in this tumultuous situation.

The domestic market is at a standstill due to the outbreak of the virus in Pakistan, but the government’s decision to ease the lockdown will open parts of the economy in the coming days. Even with certain sectors now becoming functional, the government will have to incentivise business owners and employees alike to come back to work at a potentially dangerous time. There is little evidence to support that this drop in oil prices will lead to the reduction in the value of retail oil products – such as petrol and diesel – even though the general public probably expects otherwise. But there are other ways we can use this to our advantage.

With so many of our Independent Power Producers (IPP) reliant on oil for energy production – only six oil-based IPPs in Pakistan have the capacity to produce roughly 1200 MW – ensuring that any long-term reduction in oil price is seen in power tariffs is important. Even with this reduction, the government still has to deal with circular debt somehow, so any policy decision made should reflect that as a priority above all else. This is undoubtedly a time of great unrest, but with the right decisions, the government can make that our economy is well-placed to handle an increased demand when all of this is over.