The first oil discovery dates back to hundreds of years before the Christ was born. It was first dug out by Chines in 600 BC and transported in bamboo pipelines. At that time it was used for medicine and other things. Then, thousands of centuries later it was discovered in Baku, Azerbaijan in 1830s. After that, Canada, Pennsylvania and Romania also found this natural resource on their lands in 1850s.

As far as setting prices of oil is concerned, it is done viewing costs and profits. Price started determining according to the demand and supply as oil production rose, after Standard Oil Company was set up in America.

In 1970, the Seven Sisters (ExxonMobil [earlier Exxon and Mobil], Chevron [earlier Chevron, Gulf Oil and Texaco], BP and Shell) controlled 85 percent of world’s oil reserves.

Then the Organization of the Petroleum Exporting Countries (OPEC) came into being and it brought down the competition and regularized prices. Kuwait, Iran, Iraq, Saudi Arabia and Venezuela were the founding members of the OPEC, while Qatar, Indonesia, Libya, UAE, Algeria, Nigeria, Ecuador and Gabon later joined the oil exporting organisation.

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In an interview with Express Tribune, National Cleaner Production Center Director and oil expert Dr M Ilyas Fazil said that oil prices were not set by supply and demand in the market, rather market sentiment towards future oil contracts played a dominant role in deciding the price.

“A benchmark crude or marker crude is a crude oil that serves as a reference price for buyers and sellers of crude oil. Brent, Dubai and West Texas Intermediate are major benchmark crudes. The gravity, the sulphur content and the ease of refining determines the demand for crude and thereby its price,” he said.

Ilyas Fazil said Arab Light was the reference crude for most of the Pakistani crude imports and for the pricing of local crudes as well.

He said all governments tried to reduce the burden on consumers, but, he said, there was a little room for the government as global prices dictated the price.

The oil expert said the price which an end-user has to pay is determined after costs of freight, petroleum levy, dealership, distribution and general sales tax.

He said currently Pakistanis were paying a petroleum levy of Rs15 and Rs17.12 GST on per litre.