Impending fuel shortage



March 15, 2023

Petrol and diesel are reportedly facing the prospects of getting short in supply as the prevailing economic situation has started to threaten the supply chain. It is mentioned that multiple challenges exist that may disrupt fuel supply including the foreign exchange crunch and the inability of oil firms to open Letters of Credit (LCs). LCs issue is also getting tricky as it has become difficult to get their confirmation from foreign banks as Pakistan’s credit rating is downgraded. The steep currency depreciation implied large exchange rate losses for oil companies due to lower product pricing coupled with hike in interest rates pushing the costs higher. The result is that the fuel sector has issued warning of a major fuel supply disruption though currently the country possesses 20 days quota but it is fast running out. The oil industry is already under extreme duress as the coalition government is fearful of adverse public reaction in case large increase in price structure is affected. It is often observed that wobbly financial structures like Pakistan swiftly are mauled by such an eventuality and matters gets worse here in virtually days. The reluctance shown by the officialdom in rectifying the situation is a sure recipe for disaster. TW


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