With the recession in the global economy worsening and spreading from the US to those in Europe and Japan the international oil prices continue to fall. The oil prices have decreased to the lowest ever level of $55 a barrel. The decrease signifies that during the last three months the oil prices have seen a decrease of more than 70 per cent. On July 11, 2008 the price of oil had increased to $147 per barrel.
Due to the continuous decrease in the international prices the Oil Producing and Exporting Countries (Opec) decided to decrease oil production by 1.5 million barrels per day in a meeting in Vienna. The decision was taken up in a positive manner by the oil market and the price of crude oil stabilised to $61 a barrel in London.
The international stock markets are facing an acute slump. After a bailout of $700 billion for the US monetary institutions a bailout of $69 billion was announced for real estate sector.
Various European countries including Greece, Ireland and Denmark too hurriedly took drastic measures for removing the worries of the consumers and the stake holders as well as to lend support to the bank deposits.
The worsening crisis forced many countries to reduce their oil production.
In India during the month of August the average sale of oil within the country remained 2.41 million barrels a day, the lowest during this year. Similarly, during the month of August a decrease of 8.4 per cent was recorded in the demand of oil in Japan.
According to a report during the year 2007 the oil consumption decreased in the US as compared to the year 2004 indicating that alternative sources of energy were used. Similarly, oil consumption as well as demand decreased in China.
According to report by an international magazine a further decrease in the prices of oil is expected. Though there are thin chances of oil prices going to a further low but it needs to be kept in mind that the prices of crude oil during the Asian economic crisis in 1997-98 decreased to $10 a barrel. It is true that after that the cost of oil exploration and drilling increased manifolds and now there are fewer chances of prices going down to that low.
Keeping the international monetary crisis in view a possibility of slight alterations in the price of oil cannot be ruled out.
In the past too the prices of petroleum products have played a pivotal role in case of economic slow downs or improvements.
According to a report since the World War II the international market faced crisis on ten occasions. Except for one, on all other occasions the international economic crisis worsened due to the sudden increase in the oil prices.
In 1980 as well the prices of oil decreased by 70 per cent.
To look into the oil crisis an important meeting was held in the last week of October in Vienna of the Opec member countries, in which it was announced that from November 1st the oil output will be reduced by 1.5 million barrels so as to put brakes on the decrease in the trend of decreasing prices.
At the domestic scene the foreign exchange reserves of Pakistan have decreased to $6 billion due to the payment of the import bill by the state bank of Pakistan. According to a report a temporary ban has been placed on the export of petroleum products.
According to sources in the oil companies there is a lot of pressure that oil be imported on an emergency basis as by December 31 the petrol reserves of three days and diesel reserves of seven days would be left.
With the profits that the government has made through the sale of petroleum products it has paid Rs70 billion it owed to the oil companies.
It is needed that the government take all possible measures to help the suppressed people of the country in these trying times.