News of Opec’s death was greatly exaggerated. The historic decision reached in Vienna last week has sent oil prices soaring. The oil prices have registered the highest yearly increase in six years, following the deal. Brent was last seen trading at a 17-month high. Recall that Opec members agreed to cut production by a huge 1.2 million barrels per day.

In addition, non-Opec members are likely to follow suit and cut their production by 0.6 million barrels a day. This totals to almost one percent of the global demand, and sufficient to keep oil prices soaring. That said, the rebound in prices also means good news for US shale producers. The shale industry has proved to be resilient and oil in the $50s, posts a great opportunity to ramp up shale production.

There are experts who opine that shale producers will hedge more than ever before and the production could rise quicker than anticipated. Independent analysts believe the shale gains could well offset Opec’s decision in no more than six months. It remains to be seen whether the decision spurs global demand to an extent that it maximizes revenues. Alternatively, Opec members could simply lose the market share to the US shale producers. The market’s guess is as good as anyone’s.

What is certain though, is the uncertainty. The oil market is tipped to be more volatile than ever before, till the right balance is struck. And finding an equilibrium could take anywhere from six to 12 months. Analysts at Citi Group have brushed aside notions that oil price rally could go as far as doubling the pre-Opec decision levels. The fact that there remains ambiguity over non-Opec members’ compliance, gives enough credence that oil may not run away towards $70/bbl in a hurry.

Wells Fargo has taken a more cautious outlook of the development and expects prices to recover slowly “towards a near equilibrium of $55-60/bbl by 2H2017.” Others believe that there is simply too much oil available for development and too much access to storage for oil to sustain above $70/bbl in the longer run.

For Pakistan, this could mean trouble. It could not have come at a worse time for a government seemingly entering election mode. The fiscal space is tight and there is not much room available for the government to absorb any increase in oil prices. With the 1QFY17 fiscal numbers showing worrying signs, the government does not have much room available to cut on taxes or subsidize more – should oil rally sustain. Plenty of fuel to play with for the opposition, it seems.