A power station near Karachi burns imported furnace oil. The world price of oil rises sharply. What happens to the cost of the electricity it makes, and why?
- A thermal station must keep buying fuel, because the fuel is burned and cannot be used again.
- The oil is imported, so the station pays the higher world price.
- Fuel is the main running cost, so each unit of electricity costs more to make and the import bill grows.
Answer: The electricity becomes more expensive, because the station depends on an imported non-renewable fuel.