Petrol prices in Pakistan have been a hot topic for years now. Fluctuations in petrol prices can have major effects on the inflation of a country.
However, increases or decreases in petrol prices are influenced by a range of factors, including global oil prices, exchange rates, taxes, and government policies. In this article, we are going to discuss the fluctuations happening in oil prices in Pakistan since last year and how global oil prices are related to this very topic.
Petrol Prices in Pakistan February 2024
Pakistan imports oil from international markets to fulfill its energy needs and also earns revenue from it in the form of taxes. Therefore, fluctuations in oil prices in Pakistan aren’t in the hands and control of our officials as Pakistan has to accept the prices international oil markets give.
As a result of which, when these prices rise in the international markets, Pakistan has to adjust our prices according to them.
Causes of Fluctuations in Oil Prices in Pakistan
During June 2021 – February 2022, international oil prices were stable hence there were no subsidies being provided by the Pakistan government. However, global prices took a hike and the Pakistani government started subsidizing petrol in order to provide relief to the public. But the IMF imposed conditions to withdraw these subsidies as a part of the bailout program.
The Government of Pakistan then had to remove the subsidy as they were falling short of foreign reserves and revenue. The prime minister of Pakistan, Shehbaz Sharif blames the former government and its policies for the increase in petrol prices. Recently, the govt has increased the petrol levy on petrol prices as a result of which they took a hike because an additional component is added.
Components of Oil Prices in Pakistan
- Base price or ex-refinery price, which is the cost of importing finished petroleum products.
- Retailer and freight cost, including inland freight, margins of oil marketing companies, and dealer commissions.
- Taxes, such as sales tax and petroleum levy.
Fluctuations in Prices over the year
Petrol prices in Pakistan are revised every two weeks by the Oil and Gas Regulatory Authority (OGRA), and the summary is sent to the serving prime minister for approval.
In February 2022, former prime minister Imran Khan increased the amount of subsidy by Rs. 10 on petrol and asked to keep the price of petrol Rs. 149.86 per liter till July 2022. However, with the regime change in April, former Prime Minister Shahbaz Sharif reduced the amount of subsidy by Rs. 30. As a result of which petrol prices went up to Rs. 179.86 per liter.
The price of oil around the world went up and the value of the Pakistani currency decreased compared to the US dollar, the original cost of petrol before additional expenses (called the ex-refinery price) went from Rs184.37 per liter on May 27 to Rs 206.42 per liter on June 1. As a result, the amount of money the government had to provide as a subsidy for one liter of petrol increased from Rs 17.02 to Rs 39.32.
Since then, the government has made several changes to petrol prices and subsidies on multiple occasions. They have reduced the price, given subsidies, and partially eliminated subsidies based on factors such as global oil prices, currency depreciation, and political instability.
Currently, the Per-Liter price of Petrol is PKR 272.89, and for High-Speed Diesel is PKR 278.96 in Pakistan. Recently the prices of fuel have been decreased by OGRA.
|High-Speed Diesel (HSD)
|Light Diesel Oil (LDO)
Frequently Asked Questions
What are the causes of the increase in oil prices in Pakistan?
There are several factors that affect oil prices in Pakistan such as global crude oil prices, exchange rates, taxes, levies, etc.
Does the depreciation of the rupee against the dollar affect petrol prices in Pakistan?
Yes, when the rupee depreciates against the dollar, petrol prices in Pakistan go up.
What are the effects of the increase in petrol prices in Pakistan?
The increase in petrol prices in Pakistan increases the overall inflation in the country.