The Visible Foot in Action!

DAWN:  Gas Shortage Exposes Pakistan’s Energy Crisis

To summarize

• in the early 2000s the Pakistani government made a concerted attempt to shift their automobile energy source from oil/gasoline to compressed natural gas (CNG).  The reasons for the policy were two
• Pakistan has domestic natural gas reserves but negligable oil reserves
• natural gas burns cleaner than coal and oil
• in order to promote this switch the government set the price of CNG very low.
• the policy succeeded.  80% of their automotive fleet (3.5MM units) now run on CNG
• Pakistan is now running low on CNG and power / industrial users are competing with gas stations for supply.  At current utilization rates Pakistan will exhaust their proven natural gas reserves by 2020.
• Solutions being discussed
• switching back to oil/gasoline.  
• importing natural gas from Iran - who is probably desperate for customers due to world sanctions.  The US opposes this.

Perhaps I am missing something but if they are willing to switch back to importing oil why wouldn't they instead be willing to import liquified natural gas (LNG) from neighbor Qatar - the worlds largest LNG producer?  The problem is not that there is no supply of natural gas to be had but rather there is no supply at a price that Pakistan is willing to pay.  For the last few years they have been selling CNG to their population at a below market price- which they could do because it was their gas.  The country had an asset (natural gas reserves) which they chose to dispose of by subsidizing domestic energy prices.  They could have extracted the natural gas and sold it on the world market to subsidize other purchases (food / technology / oil / xBox's / anything).  But they chose to use the asset to keep domestic energy prices low.  And that asset is running out.  The real problem is providing a subsidy which is not sustainable over the long term.  The Visible Foot in action!

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