Opec crude oil prices go down to 108 dollars

KARACHI - Following the pattern of the international markets, the OPEC crude oil prices have dropped to 108 dollars per barrel.

In July, the OPEC crude oil prices hit the highest benchmark of 144.37 dollars per barrel (on July 4, 2008), but after touching this highest price tag, the OPEC crude oil prices starting tumbling gradually and settled below 110 dollars/barrel this week, showing a considerable decline of 32.73 dollars per barrel.

As Pakistan buys crude oil from the OPEC markets, the consumers are expecting relief in the domestic prices of the fuel oil. But official sources are of the opinion that the government was recovering the amount of billions of rupees subsidy provided to the consumers on oil prices in a year's period before the general elections.

Official sources claimed that as long as the backlog of subsidy on oil prices is not recovered, the government could not slash the domestic oil prices.

They, however, said that the leaders of the coalition government could take a bold decision of providing relief to the consumers amid a substantial decline in the world oil prices, provided that the coalition partners are really serious in giving relief to their voters.

Worth noting is that the federal government is earning a net revenue of Rs 41 per liter in the shape Petroleum Development Levy, 16 per cent sales tax and inland freight equalisation margin from motor spirit  consumers in the country. But the government was least interested in reducing the domestic prices of petrol, diesel and kerosene.

According to monthly OPEC bulletin, the  OPEC Reference Basket jumped sharply higher in the first days of July, peaking at $140.73 with US dollar weakness and geopolitical tensions dominated the upward trend.

However, the sentiment eased over the course of the month with concern over slower demand growth amid weak economy signals helping the Basket to fall $13.55 or almost 10% lower. In August, the weaker economic outlook indicating lower demand as well as a recovery in the US dollar and high OPEC oil exports helped calm the market. Although the uptrend revived following recent supply disruptions in the Caucasus, the momentum was short-lived as speculative funds continued to exit the crude oil futures market.

This helped the Basket to plunge to a three-month low of $109/b on 12 August. The world economy is seen to grow at 3.9% this year, 0.1% down on last month's forecast and around 1.0% lower than in

2007. For 2009, the forecast of 3.8% is also 0.1% lower than last month's, mainly due to downward revisions made to all major OECD regions.

In contrast, Developing Countries' growth in 2009 is unchanged at 5.6%. For 2009, India's growth was revised up 0.2 pp to 7.7% while China's is unchanged at 9.2%. US economic expansion next year is now projected at 1.3%, down 0.3pp from the previous month, but still higher than the prospect of 1.1% growth in Japan and the Euro-zone.