The international oil market continue to depicted volatility in 2011 as two opposing forces pulled the prices in two opposing direction. At one end, global economic woes excreted downwards pressure on oil prices while political turmoil particularly in the MENA region kept the oil prices firm. Overall, WTI prices, global benchmark, rose by 10 percent in 2011 to close the year at $99 per barrel, which is slightly lower than 14 pc return provided by this commodity in 2010. However, Pakistan relevant, Arab Light crude prices increased by 21pc during the year.
Subsequently, retail prices of regulated products rose by 20-26pc while the prices of non-regulated products increase by 18-37pc. In addition to increase in the international oil prices, Pak Rupee (PKR) depreciation, hike in the freight charges and increased OMCs &dealer margins also contributed to this increase.
The WTI prices during 2011 stood at an average of $95 per barrel, up 20 percent as compared to $79 per barrel registered last year, as ‘Arab Spring’ fizzling into supply side issues kept oil prices high particularly in 2nd and 3rd Quarter of this year. During the period under review, WTI made a high of $114 per barrel on April 29, 2011, while made a low of $76 per barrel on October 04, 2011.
Moreover, Arab light crude oil price which is benchmark crude for local oil companies, it average around $108 per barrel up a significant 38 pc as compared to $78 per barrel last year. Furthermore, Arab Light, which historically used to trade at a discount to WTI prices traded at a premium in 2011. During the year AL traded at an average premium of $13 per barrel versus last 10-year average discount of $2 per barrel.
Two major oil products (petrol and diesel) which constitute 85 pc of total regulated oil products, their local pump prices rose by 20 pc and 26 pc, to end the year at Rs88 and Rs99 per liter, respectively. In addition to the rise in the international oil prices other factors that lead this significant rise are:
I) 4.9 pc decline in the Pak Rupee versus the US dollar,
II) increase in the freight charges,
III) staggered in 3-stages increase in OMCs and dealer margins by Rs0.48 and Rs0.50 per liter on petrol and Rs0.41 and Rs0.70 per liter on HSD, respectively.
On the other hand, in order to discourage CNG for transportation due to rising gas shortage, year-end price of CNG grew by 18 pc from Rs55 per KG to Rs65 in 2011.
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