More on Pakistan's energy problems

Quick Review:  CNG stands for compressed natural gas.  In the early 2000s Pakistan switched most of their car fleet over from gasoline to a mix of gasoline and CNG.  Pakistan is now suffering from a shortage of CNG.

Press TV:  Pakistan shuts down CNG pumps due to gas shortage
"The government has suspended supply of gas to CNG pumps for six days a week in northern part of the country in a bid to deal with the growing energy demands.  But the decision has virtually affected the routine life in major parts of the country.  Due to suspension of CNG supply, public transport has disappeared from the roads while taxi owners have raised fares compounding the miseries of common citizens.  To make matters worse even petrol has dried up at most of the filling stations."

Daily Times:  CNG seekers spending nights at filling stations
"LAHORE: Extraordinary long queues of vehicles were witnessed at all CNG stations of the provincial metropolis on Sunday when gas sale was opened after load shedding of six days instead of scheduled weekly load shedding of three days. CNG consumers remained waiting for hours in long queues and cursed the SNPGL and all Pakistan CNG Association for humiliating the orders of the Supreme Court of Pakistan and abusing their right of cheap vehicular fuel. They held the federal government responsible as well as the Punjab government and city district government for the unannounced and unlawful 6 days load shedding despite of schedule of three days weekly load shedding."

The International News:  Energy crisis crippling economy
"The Planning Commission says that power cuts shaved three to four percent of GDP, with industry bearing the brunt.  According to experts, there is no quick solution in sight as major projects, such as the $12 billion Diamer-Bhasha dam, which is expected to generate 4,500MW, will not come online for another five or six years. The rivers and valleys of the mountainous north may offer more than 50,000MW of untapped hydroelectric potential, but the power generated could be unreliable and not guarantee year-round supply.  Coal reserves have been found in the Thar desert but the quality is uncertain and international donors are unwilling to invest in such an environmentally-damaging form of energy.  The government is keen to develop nuclear power as it tries to wean itself off expensive imported hydrocarbons.  The country spends 7.5 percent of GDP on buying fuel, according to the Planning Commission.  There are currently three nuclear plants generating a total of 740MW of power and there are plans to expand this to 8,800MW, but only by 2030."

we originally wrote about this here  To quote ourselves

"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."

What would happen if Pakistan allowed the price of CNG to float?  Its price would increase until demand balances supply.  Some persons would get priced out of the market- but quantity rationing would disappear.  Eventually higher prices would bring new sources of natural gas on line:  either from domestic sources, or via pipelines from Iran or Afghanistan, or LNG from Qatar.  But any of these supply increases could take a while since there is a substantial infrastructure that needs to be developed.  There are two problems here. (1) price is not reflecting supply demand - so they end up with a shortage. (2) there is a substantial path dependency problem.  The formerly artificially low prices of CNG caused Pakistan to become heavily dependent on natural gas.  Now there will be a substantial cost to shift back to other energy sources.  The Visible Foot in action!