ISLAMABAD: Prices of petroleum products are expected to rise with effect from November 1, 2023 owing to a surge in international oil prices due to the ongoing conflict in the Middle East.
Though neither Israel nor Gaza produce any oil, yet fears of oil-rich regional countries being drawn into the conflict is rising each passing day.
Since October 16, 2023 international prices for petrol and high speed diesel (HSD) have increased by $3 and $1 per barrel, respectively. However, there are still six days left before the Oil and Gas Regulatory Authority (OGRA) gives its recommendation, and the government notifies the price of oil products for the next fortnight (1st November to 15th November).
The reduction in the price of petrol and HSD announced on 16th October, to be valid till end October, contributed to a 1.7 percent reduction of Sensitive Price Index (SPI) for the week ending 19th October against the weeks ending 10th October. However, the weightage of petrol is 1.4 percent and diesel 0.0114 percent in the 51 items included in the calculation of the SPI.
“Consequent to substantial reduction in fuel prices, I have directed the concerned authorities at Federal and Provincial level to activate a strict price control mechanism”, Interim Prime Minister Anwaar-ul-Haq Kakar said in a post on X, formerly Twitter on October 16, 2023.
According to oil companies’ initial estimate, the cost of petrol in Pakistan may rise by Rs3 per litre, and diesel price may increase by Rs0.86 per litre amidst the ongoing war between Israel-Hamas and projection of the exchange rate.
The Pakistani rupee has experienced modest gains during this month, strengthening by about Rs 4 (to Rs 278) since October 16, compared to the first half of October s’ average rate of Rs282 per US dollar.
The future direction of fuel prices will heavily depend on global market conditions and the exchange rate, sources told this correspondent.
On October 16, 2023, interim government announced a reduction in the price of petrol by Rs 40 per litre, a cut of 12 percent, and High Speed Diesel by Rs 15 per litre, a reduction of 4.7 percent, with a view to reversing declining demand that was compromising the capacity of the government to meet the budgeted petroleum levy target of Rs 869 billion.
The demand for petroleum products hit a 44-month low at 1.06 million tons in September 2023.The sales of petroleum products declined to the lowest level since the Covid-19 lockdown in March 2020, with petrol sales down 23 percent month-on-month (MoM) and HSD down 28 percent MoM.
Copyright Business Recorder, 2023