KARACHI, March 6: The price of furnace oil -- the main cost component of power generation -- averaged Rs38,348 per ton in the country on Thursday, which analysts said represented 27.84 per cent increase over its price at Rs29,997 on January 1.

At the oil marketing company, PSO, terminal in Karachi, the product, largely regarded as the crudest form of petroleum products and yet an essential fuel for several industries, cost Rs36,650 per ton, up by Rs1,150 since February 15.

The rise in price had been fuelled by the international crude prices, which were shooting to a record high. From power looms in Faisalabad to cement plants in the NWFP and Independent Power Producers (IPPs) all across the country, the increase in furnace oil price raises the prospects of a major hit on their bottom line.

“Oil forms 31 per cent of the cost of generating electricity and 83 per cent of that is provided by furnace oil,” says Maheen Rahman, head of research at BMA Capital. The analyst said that it was not just the FO, but rising prices of other petroleum products as well which was swelling the nation’s energy bill. “Some of the burden to consumers was passed on through the recent tariff increases, which was in order,” says the analyst.

The government needs to put reins on galloping prices of commodities and other essentials to curb inflation, but as long as the international crude price keeps up the surge, the prices of petroleum products would inevitably increase.

“It is for the government either to dig a deeper hole of trade deficit or take the ‘politically incorrect’ decision of passing on the burden to consumers,” said another cold calculating energy sector analyst.