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Oil price hike: Who is to blame?

Written by Hamed Kohistani
Sunday, 05 February 2012 10:26

Oil price hike: Who is to blame?

Every winter without fail the price of oil spirals upwards, and consumers are forced to dig deep into their pockets. Hamed Kohistani investigates the reasons.
The price of fuel has risen sharply through the winter months in Afghanistan. The Ministry of Commerce and Industry pins the blame on traders.
The ministry estimates Afghanistan requires roughly 3 million litres of oil. Foreign forces in the country - NATO and ISAF - consume a third of the fuel imports.
In the last two months the price of fuel has gone from 50 to 100 Afghanis per kilogramme of gas (roughly from 1 to 2 USD) and the price of oil from 55 to 79 Afghani (roughly 1.1 to 1.6 USD).
The ministry took action to control the prices by announcing a fixed price of 65 Afghani (1.3 USD) for every kilogramme of gas sold in governmental booths and gas pumps in petrol stations. But short supply fuelled the price rise.
Oil and gas imports were affected adversely by transit problems with neighbouring countries including the closing of the border by Pakistan; fuel mafia, hoarding and speculation, and competition between traders. Following the closure of the Pakistan border in the wake of the death of 24 Pakistan soldiers in an ISAF air strike in November the problem became even more acute. Fareed Ahmad Sherzoy the director of the fuel and gas department in the Ministry of Commerce and Industry blamed the shortage on "anarchy and unsound competition between Afghan traders for the purchase of Turkmenistan oil".

Promises of good behaviour
The ministry, he said, has identified the companies involved which have caused prices to rise, and instead of prosecuting them has chosen to extract commitments before the attorney general's office not to repeat the offence.
Sherzoy said, "These people have been recognised and they have been punished."
But Wahidullah Ghazikhail, the spokesman of the Ministry of Commerce and Industry, claimed he was not aware of the action taken by the attorney general's office. He said the price of gas and oil has gone up because of "high transport costs, rise in international prices, Kazakhstan's refusal to sell to Afghan traders in November and the resultant oil shortage. However the ministry was able to control prices by ensuring supplies were restored, he said.
Khan Jan Alokozai, assistant director of the chamber of commerce, in the ministry, rejected the allegations of hoarding and monopoly levelled against importing companies. In his opinion the major reasons for the sudden hike in prices were lack of support for Afghan importers, administrative corruption in the government, and high taxes. Alokozai said they have documentary proof that fuel trucks take between three to five months to make the journey from Turkmenistan to the border at Hairatan. The transport companies have to pay 60 dollars per truck to Uzbekistan for transit facilities.

Hidden costs
Oil shipments have also gone missing, said Alokozai. Documents in the ministry's possession reveal 18,000 litres of oil were missing from a shipment of 60,000 litres enroute from Turkmenistan to Hairatan. Afghan importers simply pass on the burden of the missing oil to consumers by adding their losses to the price, according to Alokozai.
"The government of Afghanistan has responsibility of providing transit facilities to companies," he said.
The competition is so stiff that companies "pay money to the authorities of the railways in Uzbekistan to create problems for rivals, yet no complaints have been received by the Ministry of Commerce and Industry," he said.
According to his information, importing companies pay as much as 436 USD for every tonne of oil towards customs and municipality taxes, for oil wagons etc., - a hidden cost they add to the price of gas and oil.
Aziz Shams, the spokesman of the Ministry of Finance, said according to a decision of the council of ministers the ministry earns the least on oil imports.

Oil mafia
How come the Ministry of Commerce and Industry has failed to rein in the oil mafia?
Mir Mohammad Amin Farhang, the former minister of commerce and an economist, said the oil mafia could be harnessed if the benefits were not being shared by the authorities responsible for controlling prices.
According to Amir Khan Yar, the head of the economic commission in Parliament, the link between the fuel mafia and government officials ensures that no action is taken. He said the economic commission would be summoning the minister of commerce and ordering him to find a solution.
The sharp hike in prices is an annual feature every winter. The government has not been able to solve the problem. The government has to ensure there are adequate stocks so consumers are not affected by the activities of the oil mafia.

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