The so called oil price war between Moscow and Riyadh has shifted the world’s attention from coronavirus to Black Gold, which has created turmoil in commodity and equity markets the world over. The oil shock may have several potential victims around the world, such as OPEC members and oil companies and workers, but a steep decline in the prices of crude oil will benefit a lot of players as well, including Pakistan. The benefits of oil price reduction, if passed on to the public, can help bring inflation rate from 11 per cent to a single digit figure in the near term.
If the prices remain subdued, which is the most likely scenario given the high levels of ego in the Kremlin and the Riyadh royal palace, the fallout on world stock and energy markets is hard to calculate. These are hard times for economies because of the coronavirus outbreak which has slowed almost every sector – trade, tourism, hospitality, tourism, transportation and now energy. The matter at the heart of the discord is Russia’s refusal to play along with Saudi Arabia and cut oil production to sustain oil prices, and Saudi Arabia’s retaliation by reducing prices to teach Russia a hard lesson. Saudi Arabia and other OPEC members are heavily dependent on oil revenues, whereas Russian economy has oil revenues as just a slight part of its exports. The war of oil giants has, however, many implications as it may slow down oil drilling activities in Pakistan. Thousands of oil workers could be about to receive pink slips. These developments present a bleak future for oil sellers like Venezuela and Iran, already facing tough conditions because of US sanctions.
Pakistan’s economy, which has been reeling from a consistent slowdown, has an opportunity to improve. The first blessing will be a major cut in the oil import bill. The public, which has been under intense pressure because of inflation and slow economic activity, could well be a major winner of the oil shock. Any instance of increasing oil duty will just demonstrate the inefficiency of the economic policy makers.
