Historically low oil prices owing to a glut caused by excess supply and low demand is such an opportunity for Pakistan, which is one of the most oil dependent countries in the world as it makes up close to 29% of our total merchandise imports, one of the highest in the region. Thankfully, owing to some sensibility and attentiveness at the petroleum ministry, a summary has been moved to the Economic Coordination Committee (ECC) to allow hedging of 15 to 20 percent of the country’s total oil import exposure. By purchasing oil today at relatively higher prices by paying a premium on top of the spot price (prevalent price), Pakistan will gain in the long-term when oil prices eventually rise. Although this would mean consumers do not get the full benefit of lower oil prices right away, they will in the long run, provided the hedge is successful and the government passes on those gains through lower fuel prices. A lack of storage options and capital means a financial instrument of the sort that is being considered is the best way to buy cheap oil for an extended period of time.

Source: Pakistan Today May 11, 2020 19:06 UTC