Pakistan – In a move that is set to further strain the pockets of its citizens already grappling with high inflation, the caretaker government of Pakistan has raised petrol and diesel prices to unprecedented levels in its latest fortnightly review.
Sharp Increases in Petrol Prices
According to the Finance Ministry, this significant hike in fuel prices is a direct response to the soaring international oil prices. The decision will result in a substantial increase in the cost of petrol by Rs26.02 per litre and diesel by Rs17.34 per litre. As a result, the price for one litre of petrol will now stand at Rs331.38, and high-speed diesel (HSD) will cost Rs329.18 per litre. This marks the second price increase within a single month, pushing fuel prices to record highs.
On September 1, the caretaker government had already increased petrol and diesel prices by over Rs14 per litre, citing similar reasons of rising global oil prices and fluctuations in exchange rates. At that time, petrol prices went up by Rs14.91 per litre, and HSD prices surged by Rs18.44 per litre.
The recent surge in petrol prices was widely anticipated due to the continuous rise in global oil prices. The slight appreciation of the Pakistani rupee against the US dollar is expected to have a limited impact on petroleum prices, as it is unable to counterbalance the effects of increasing global oil prices.
According to Reuters, oil prices reached a 10-month high on the same day as the increase in Pakistan’s fuel prices. This surge is attributed to supply constraints, including production cuts by Saudi Arabia, and optimism regarding Chinese demand for crude oil. US West Texas Intermediate futures were up 0.7% to $90.78 a barrel, while Brent crude futures increased by 0.2% to $93.91 a barrel. Both benchmarks achieved their highest levels since November 2022, representing a 4% increase for the week.
The government of Pakistan reviews and adjusts petroleum prices every fortnight based on recommendations from the Oil and Gas Regulatory Authority (Ogra). However, the final decision rests with the finance ministry, which sometimes absorbs a portion of the increase to alleviate the burden on consumers. Nevertheless, the government is compelled to raise fuel prices as part of its agreement with the International Monetary Fund (IMF) under a $3 billion standby agreement.
This substantial increase in fuel prices is expected to have a cascading effect on the cost of living in Pakistan, impacting transportation costs and the prices of essential commodities. As inflation continues to challenge the financial well-being of Pakistani citizens, the government’s decision to raise fuel prices will undoubtedly pose additional economic hardships.
The population of Pakistan will closely monitor the evolving situation and await further developments, hoping for some relief from the economic challenges they currently face.