Why should OPEC Plus increase energy supplies?

One is shocked and dismayed at the role being played by the developed countries in destroying oil producing countries one after another. Over the years they have partnered with United States in imposing embargoes and/or virtually destroying oil producing countries like Iran, Iraq, Venezuela, Libya and Russia being the latest target.

It may be said that only United States can be blamed for the ongoing Russia-Ukraine conflict. Instead of facilitating ceasefire, United States is dumping tons of lethal weapons as well as billions of dollars in Ukraine to further fuel the war.

This on one hand has cut off Russian oil and on the other hand stopped export of eatables from Ukraine, adding to unprecedented inflation throughout the world.

The ministers from the Group of Seven countries on Friday called on Oil Producing and Exporting Countries (OPEC) to act responsibly to ease a global energy crunch brought on by the Russian invasion of Ukraine, even as they announced a breakthrough commitment to phase out coal-fuelled power.

The call, made at the end of three-day talks in Berlin focused on climate change, underscored that the world’s major economies were grappling with how to contain inflation and higher energy prices while sticking to environmental goals.

OPEC and its allies, a group known as OPEC Plus, to which Russia is a part has so far rebuffed Western calls for a faster increase in oil production to lower surging prices.

“We call on oil and gas producing countries to act in a responsible manner and to respond to tightening international markets, noting that OPEC has a key role to play,” said a communiqué issued at the end of the G7 talks.

“We will work with them and all partners to ensure stable and sustainable global energy supplies.” Ministers from the G7 group stressed that they would not let the energy crisis derail efforts to fight climate change.

They announced a commitment on Friday to work to phase out coal-powered energy, although failed to set a date for doing so.

The commitment was weaker than a previous draft of the final communiqué which had included a target to end unabated coal power generation by 2030.

Sources familiar with the discussions said Japan and the United States had both indicated they could not support that date. But the pledge still marked the first commitment from the G7 countries to quit coal-fuelled power.

The war in Ukraine has triggered a scramble among some countries to buy more non-Russian fossil fuels and burn coal to cut their reliance on Russian supplies.

 

 

 

 

If India can buy Russian oil, why can’t Pakistan?

In Pakistan it is common that ministers often talk about decisions to be made by other ministries. One such trespassing was committed by Minister of State for Petroleum Musadiq Malik on Friday. He said that an increase in electricity tariff would follow fuel price adjustment through withdrawal of subsidies.

Talking about PTI’s claims of 30% cheaper oil and LNG import deals with Russia, the minister said there was no agreement or memorandum of understanding on record which could prove such claims. However, he admitted that the former energy minister had written a letter to the Russian minister showing interest in purchasing oil and gas from Russia, but there was no response from the other side.

Pakistan’s ambassador in Moscow approached the Russian energy ministry, but did not get a response either on cheaper oil or gas, said Malik.

I am ready to accept that Imran Khan spread disinformation, but will Malik be kind enough to share, has the incumbent government approached Russia for the purchase of cheaper oil?

I have a glut feeling that the present government, living under the shadow of the US administration just couldn’t have dared to do that.

Lately, India expressed its intention to continue to buy cheap oil from Russia.

"We will get cheap oil from Russia," the government official told reporters on Wednesday, adding that the average price at which the world's third largest oil importer buys crude is currently above US$100 a barrel.

With concerns that conventional payment routes could be blocked due to Western sanctions on Moscow, including on banks, work was ongoing to set up a rupee-rouble trade mechanism to facilitate transactions, the official said.

Without elaborating further, the official added that no final decision had been taken and all possible ways to pay for goods were still under discussion.

While Russia's oil exports have not to date fallen under Western sanctions, some international traders have avoided buying the barrels given the disruption to payment systems and shipping.

The official also said India was increasing its dependence on coal due to surging power demand, adding that state-run Coal India will produce more coal in the coming months.

There’s been a significant uptick in Russian oil deliveries bound for India since March after Russia’s invasion of Ukraine began — and New Delhi looks set to buy even more cheap oil from Moscow, industry observers say.   

China, already the largest single buyer of Russian oil, is also widely expected to buy more oil from Russia at deep discounts, they say. 

Major oil importing countries such as India and China have been grappling with higher crude prices, which have soared since last year. While oil prices have been volatile in recent weeks, swinging between gains and losses, they are still around 80% higher compared to a year ago.

“We believe that China, and to a lesser extent, India will step up to buy heavily discounted Russian crude,” said Matt Smith, lead oil analyst at Kpler.

“Urals crude from Russia is being offered at record discounts, but uptake is limited so far, with Asian oil importers for the most part sticking to traditional suppliers in the Middle East, Latin America and Africa,” the International Energy Agency said on March 17, 2022. Urals crude is the main oil blend that Russia exports.

“As of mid-March, we see the potential for 3 million barrels a day of Russian oil supply to be shut in starting from April, but that could increase if restrictions or public condemnation escalate,” the IEA said.

 ‘Significant uptick’ of Russian oil bound for India

However, since the beginning of March, five cargoes of Russian oil, or about 6 million barrels, have been loaded and are bound for India – set to be discharged in early April, he told CNBC in an email.

“This is about half the entire volume discharged last year — a significant uptick,” Smith said. 

 “Today, the Government of India’s motivations are economic, not political. India will always look for a deal in their oil import strategy. It’s hard not to take a 20% discount on crude when you import 80-85% of your oil, particularly on the heels of the pandemic and global growth slowdown,” Kapadia told CNBC in an email.

Both countries have had a long history. Russia has supported India on a variety of areas including the provision of military and defense-related equipment — as much as 60% of the Asian country’s needs, according to Kapadia.

In the late 1950s, India also leaned on Russia for rupee-ruble currency swap arrangements to finance its imports when the former was “broke,” said Kapadia.

Russia has also supported India on crucial issues such as the dispute with China and Pakistan surrounding the territory of Kashmir.

“White House pressure to curb purchases of crude oil from Russia has fallen on deaf ears in Delhi,” said Kapadia. “The real question will be how the US and Europe respond to India should they extend an olive branch to Russia by providing them an outlet for their oil.”

 

Pakistan: Like Minister, Prime Minister also lacks rational thinking

Yesterday, I posted a blog; its title was How can Finance Minister sound so dumb? My heart was even heavier to read the news today, “Prime Minister Shehbaz announces Rs28 billion relief package to mitigate impact of fuel price hike”.

I have all the reasons to believe that the prime minister is not fully aware of nitty-gritty of managing economy of Pakistan. However, he has a team of ‘economic experts’, which is fully aware of the targets agreed with the International Monetary Fund (IMF) and prevailing state of the affairs.

Having gone through the details I arrived at the conclusion that the prime minister is either stubborn or does not listen to what is being advised by the experts.

Reportedly, on Friday, Prime Minister Shehbaz Sharif announced his government would launch a new relief package of Rs28 billion per month to protect the poor from the burden of petrol and diesel price hike.

Any government has a right to pay subsidy provided it has enough money in its kitty. Pakistan already faced huge budget deficit, therefore, it can’t afford to pay untargeted subsidies.

Prime minister said under the relief package, the premier said, 14 million poor families, comprising 85 million people, would be given Rs2000 per family. I am surprised to read his statement as he is creating a new breed of baggers. He is also opening floodgates of corruption.

He said this was in addition to the monetary assistance being given to them under the Benazir Income Support Program. This relief package will be added in the next budget, the premier said.

Prime minister hasn’t come out of the shadow of Imran Khan. In his first address to the nation — a day after his government removed fuel subsidies and increased the price of petrol by Rs30, he made two points: 1) it was because of the previous government  2) he had to take the difficult decision with a heavy heart.

He termed the PTI government's decision to grant fuel subsidy a trap for the upcoming government. "Petroleum prices are increasing worldwide but they (PTI government) subsidized fuel despite knowing that the treasury cannot bear its burden."

The hike in petroleum prices is a universal phenomenon and Khan can’t be blamed for this. The added insult is huge depreciation of Pak rupee. This depreciation was mostly because of failure of the incumbent government to revive relationship with IMF.

This is also to remind the prime minister that his government is yet to announce increase in electricity and gas tariffs. Would he further increase the subsidy?

In my opinion, much of the burden of common man would be reduced if government orders 50% reduction in the remunerations of MPAs, MNAs, Senators and Ministers.  Similarly ‘fuel’ allocations should also be reduced to half.

If common man is required to pay higher prices of petroleum products, electricity and gas why perks of elected representatives can’t be reduced to half?

 

 

 

Pakistan: How can Finance Minister sound so dumb?

I am completely shocked after reading the details of press conference of Finance Minister, Miftah Ismail, particularly his rationale for the hike in the prices of petroleum products. Two of his explanations sound too comical.

The finance minister said: 1) the decision has been taken to revive the International Monetary Fund (IMF) program and 2) the government had no other option but to raise the prices, adding that the government would still bear a loss.

Many of the readers would burst into laughter after reading that the government was aware of the political repercussions of the decision, saying "we will face criticism but the state and its interests are important to us and it is necessary for us to save it."

He didn’t have the realization whatsoever, when he said, the country could have gone in the "wrong direction" if the steps were not taken.

He said the decision was a tough one for Prime Minister Shehbaz Sharif, saying "we cannot let the state sink for the sake of politics."

He claimed the price revision was not solely due to the IMF's pressure, saying "the Fund indeed refused to grant further loan until we raise prices ... but we [also] had to take this decision after all."

One can recall, the price hike came a day after the government and the IMF failed to reach an agreement on an economic bailout mainly because of the indecision of Shehbaz Sharif government on fuel and electricity subsidies and resultant next year’s budget uncertainties.

I am inclined to draw a conclusion that the strings on incumbent government are still pulled by certain external forces, if not many of the acts sound ‘childish’.

It may be recalled that most of the analysts, even the worst critics of PML-N policies have been asking the incumbent government to announce hike in the prices of energy products and get US$ one billion tranche released.

I may also go to the extent of saying that general public was ready to accept the hike to avoid further delays in discussions with the IMF. However, Pakistanis will be right in asking the Minister, what took you so long to arrive at the conclusion which was writing on the wall?

Shehbaz Sharif government deprives overseas Pakistani from voting rights

In a highly contemptuous move, the government headed by Shehbaz Sharif has deprived overseas Pakistanis from voting on Thursday. The move simply shows that he and his team has no regard what so ever for those who have been remitting billions of US dollars every month and are the saviors of Pakistan. 

The remittance flows are one of the largest sources of foreign income for Pakistan. These prove to be more stable than capital flows and remained resilient during the coronavirus pandemic.

It is the remittances of overseas Pakistanis that have saved the country from committing default. The amount received from International is paltry around US$2 billion per annum, which alone cannot keep the country afloat.

The National Assembly of Pakistan passed the Elections (Amendment) Bill 2022 on Thursday, which seeks to remove the use of electronic voting machines (EVMs) in general elections as well as disallows overseas Pakistanis from voting.

Parliamentary Affairs Minister Murtaza Javed Abbasi presented the bill that was passed with a majority vote, with only members of the Grand Democratic Alliance opposing it.

Before presenting the bill, Abbasi presented a motion for allowing the bill to be sent directly to the Senate for its approval, bypassing the relevant standing committee. The motion was also passed by the NA with a majority vote.

Speaking about the legislation, Minister Azam Nazeer Tarar said it was of immense significance. He recalled the previous PTI government had made multiple amendments to the Election Act, 2017, including those that allowed the use of EVMs and granted overseas Pakistanis the right to vote in general elections.

He also dispelled the impression that the amendments were aimed at depriving overseas Pakistanis of their right to vote. "Overseas Pakistanis are a precious asset of the country and the government does not believe in snatching their right to vote," he said.

It may be recalled that the remittances from overseas Pakistanis rose to a record high of US$3.1 billion in April, 2022. Remittances crossed US$3 billion for the first time ever. These inflows increased 11.2% MoM and 11.9%YoY basis.

As a result, total remittances in 10 months of this fiscal year rose to US$26.1 billion, 7.6% higher than in the same period in 2020-2021. The figures suggest that Pakistani expatriates sent home more funds to support their families.

Pakistan-IMF discussions remain inconclusive

In the simplest words, Pakistan-IMF discussions held in Doha remained inconclusive. The International Monetary Fund (IMF) on Wednesday emphasized upon Pakistan the urgency of removing fuel and energy subsidies to achieve program objectives.

The incumbent government does not seem ready to withdraw subsidies.

According to the IMF, the mission held highly constructive discussions with the Pakistani authorities to reach an agreement on policies and reforms that would lead to the conclusion of the pending seventh review of the authorities’ reform program.

It said the considerable progress was made during the discussions, including on the need to continue to address high inflation and the elevated fiscal and current account deficits, while ensuring adequate protection for the most vulnerable.

"In this regard, the further increase in policy rates implemented on May 23, 2022 was a welcome step. On the fiscal side, there have been deviations from the policies agreed upon in the last review, partly reflecting the fuel and power subsidies announced by the authorities in February this year."

Meanwhile, Foreign Minister Bilawal Bhutto-Zardari said the ongoing bailout deal between Pakistan and the IMF was "outdated" given a number of global crises.

"This IMF deal is not based on ground realities, and the context has absolutely changed from the time that this deal was negotiated," Bilawal told Reuters on the sidelines of the World Economic Forum.

"This deal is a pre-Covid deal. It is a pre-Afghanistan fallout deal. It is a pre-Ukrainian crisis deal. It is a pre-inflation deal," said Bilawal.

Terming the deal "outdated" he said it would be unfair and unrealistic to expect a developing country like Pakistan to navigate geopolitical issues under the current agreements.

"We have to engage with the IMF and we have to keep Pakistan's word to the international community ... However, going forward, it is very legitimate for Pakistan to plead its case," Bilawal said.

The newly-elected government began talks with the Fund a week ago over the release of a US$ one billion tranche under an Extended Fund Facility, a process slowed by concerns about the pace of economic reforms in the country.

A US$6 billion IMF bailout package signed in 2019 has never been fully implemented because the government reneged on agreements to cut or end some subsidies and to improve revenue and tax collection.

Over the past weeks as the government has failed to take decisive economic decisions, most prominent being reversal of fuel subsidies.

Analysts and experts have linked the economic pressure to uncertainty over the continuation of the IMF loan program coupled with a rising oil import bill and widening trade deficit.

In recent meetings with Pakistan, the IMF linked the continuation of its loan program with the reversal of fuel subsidies, which were introduced by the previous government. However, Prime Minister Shehbaz Sharif has multiple times rejected summaries by the Oil and Gas Regulatory Authority and the finance ministry to increase fuel prices.

The PTI had announced a four-month freeze until June 30, 2022 on petrol and electricity prices in February this year as part of a series of measures to bring relief to the public.

PML-N and other political parties, part of the new coalition government were critical of Imran Khan's government for derailing the IMF program through unfunded fuel subsidies, but despite being in power for nearly six weeks, have not reversed these subsidies.

 

Suez Canal revenues to rise by 27% for financial year ending June 30, 2022

According to Finance Minister Mohamed Maait of Egypt, Suez Canal revenues are expected to rise to US$7 billion for the financial year 2021-22 ending on June 30, 2022, up 27% from US$5.5 billion for the last year.

Calendar year 2021 saw canal revenues hit a record US$6.3 billion, up 13% from US$5.6 billion seen in 2020.

The canal is the fastest route between Europe and Asia, and despite a 10% increase in toll rates implemented in March 2022, still saves shipping lines potentially hundreds of thousands of dollars in time and fuel, compared to sailings around the Cape of Good Hope.

Asian ship owners have been among the most vocal to complain about the toll hike, in addition to tariff increases introduced at the beginning of February this year.

Seatrade Maritime News calculates a 9.4% rise in fees for a southbound transit by a standard dry bulk vessel, as well as a similar increase in rebate, as of today, as compared to rates in November 2020.

Egypt mobilized public support for a widely subscribed national public debt program to finance a US$8.5 billion canal expansion, finished in 2015. Completion of further works is expected next year.

With container shipping lines reporting profits of around US$190 billion last year, US$60 billion in the first quarter of 2022, Egypt can be expected to maintain the pressure on toll rates for some time to come.

Despite the fact that tourism flows to Egypt declined by 35% due to the Russian invitation of Ukraine, Maait expects tourism revenues to hover around US$12 billion by the end of the financial year.

The canal, as well as tourism receipts are important to Egypt’s GDP, which the International Monetary Fund expects to reach US$435.6 billion in nominal terms in 2022.

The Asian Shipowners’ Association (ASA) member hit out at recent proposed toll changes at both the Panama Canal and Suez Canal.

At a meeting on April 18, 2022, ASA delegates noted the significance of the Suez and Panama canals as critical global infrastructure and called for the canals to avoid “sudden and significant” changes in tolls and charges.

“Delegates expressed their confusion against new surcharges introduced on March 01, 2022 with only 48 hours prior notice, then to be revised on May 01, 2022 by the Suez Canal Authority (SCA), which resulted in roughly a 7% to 20% toll increase for many types of vessels, in addition to a 6% tariff hike for most types of vessels, implemented on February 01, 2022,” said ASA.

Uncertainty around how surcharges operate could undermine the stability of the Canal, said the committee, calling for the industry to express its concerns to SCA.

ASA delegates some positives in the Panama Canal’s new toll system proposed earlier in April 2022 by the Panama Canal Authority (ACP). Delegates said the ACP had given sufficient notice and a formal consultation period, but were concerned that significant toll hikes could affect the long-term viability of the canal, “as the mark-up for some types of vessels may exceed 100% in 2025, compared with the current toll.”

The ASA meeting also discussed the review of anti-trust exemptions for carriers on the US, a policy delegates said was “indispensable for the healthy development of the liner shipping industry and the maintenance of a reliable service to the entire trading community.” ASA will continue its efforts to maintain anti-trust exemptions for liner shipping agreements.