In May and June, Pakistan faced another fuel shortage with long queues across nationwide petrol pumps being seen. In the aftermath of the crisis, the usual blame game between the government and Oil Marketing Companies (OMCs) started, with both sides blaming the other for the shortage. The crisis came amid the COVID-19 pandemic, which had already deteriorated the economic condition of the masses. It was a huge blow for the already suffering citizens, as not only could they not find petrol during the pandemic, the shortage further inflated the prices of basic commodities.

Moreover, it all happened right before Eid-ul-Fitr, when federal government lifted the COVID-19 lockdown across country. According to officials, the crisis occurred due to sudden rise in demand of petrol and diesel, while private OMCs including Total and Shell were also blamed for illegal storage. But, the OMCs put the blame on government for this catastrophe.

The situation, for the masses, became worse after the government introduced a sudden hike of Rs25 in June 2020. The decision faced a serious backlash from the consumers. The hike was introduced in Pakistan despite the petroleum prices were low in global market.

To investigate the crisis, federal government established an inquiry committee. After a brief probe, the committee found 9 private OMCs responsible for the shortage. In its report, the committee said that they found ample fuel in storage facilities of these OMCs but they still blocked its transport to retailers. The committee said that the OMCs wanted government to increase the price of petrol and refused to sell it at low price.

In its recommendations, the committee imposed Rs40million fine for six companies including Total Parco, Shell Pakistan, Attock Oil Pakistan, Attock Petroleum, Puma Energy and Hascol Petroleum asked the government to cancel their licenses. The committee asked these OMCs to ensure a proper supply to petrol stations.

Furthermore, Pakistan State Oil (PSO) claimed that the private companies did not have essential 21-day storage at their depos. According to the state-owned company, the private OMCs did not adhere to government’s order of storing the fuel for at least 21 days, which caused the crisis in country.

According to private OMCs, the energy ministry is responsible for the shortage of petrol in the country. They said despite the private companies request for higher imports in months of May and June, due to harvest season, the ministry ordered the companies in March, “to cancel their planned imports (April onwards) and increase their off-take from refineries so that refinery operations are maintained at an adequate level”.

The companies said that the ban on import did not effect the demand during COVID-19 restrictions as there were less private cars and no public transport on the roads, however, after government decided to lift the shutdown, the demand surged very rapidly, leading to the shortage as companies did not had enough petrol to supply to the stations.

If we look into the overall situation, the federal government seems to be more responsible for this crisis. The ruling party ordered the OMCs to stop import of the fuel products in March, and did not anticipate the surge in demand after lifting the restrictions.

It is pertinent to mention that it takes around 45 days for petrol to reach Pakistan’s refineries from abroad, which means the companies have brought it on 45-day-old prices. According to sources, the OMCs imported the fuel on high prices, then the government put a ban on import, and reduced the prices. This means that the companies had bought the petrol on high prices, and was asked by the government to sell it on very lower prices, which means huge losses. Hence, the private OMCs refused to comply with government orders, causing a rift, which leads to a petrol shortage in the country.

Moreover, there was clear lack of coordination between the government and OMCs over the crisis as both sides kept on blaming each other. The government must have anticipated the increase in demand, once the COVID-19 shutdown is lifted, but energy ministry apparently didn’t do its homework.

Discussing this whole fiasco, PakWheels Director Suneel Munj said that the ban on import was one of the major reasons behind this crisis. “The refineries supplied the fuel in limited capacity to the pumps after lockdown ended, because they had bought it on high prices, but it was being sold on lower prices, which led to the shortage,” he added.

Meanwhile, Pakistan Muslim League-Nawaz (PML-N) leader and former prime minister of Pakistan Shahid Khaqan Abbasi blamed high levy tax by the government on petroleum products for the shortage. During a press brief, Abbasi said that the ruling party is receiving around Rs30 as tax on per liter, which is record high in history of Pakistan. “The government has increased its own income, while burdening the citizens, which has caused this crisis,” he said. The former PM was of the view that current government must reduce the levy tax and give some relaxation to the public.  

Commenting on the shortage, Federal Minister for Energy and Petroleum Omar Ayub Khan said that some OMCs did hoarding and tried to create an artificial shortage in the country.

“When government reduced petrol prices, some elements refused to sell it on that price and started storing, which causes shortage in some pockets in the country,” he said adding that the government had imposed fines on OMCs responsible for this, and ruling party can cancel their licenses.

Experts maintain that the only solution to avoid such crisis in future is strong coordination between both sides. The two need to discuss and negotiate before implementation of new policy or amid a crisis. Through proper coordination and dialogue, federal government and OMCs can resolve their issues. A proper policy and institutional structure is also essential to avoid such events, which ultimately affected the masses.