Expected: Oil prices likely to rise up to 14.6%

Oil prices may rise by up to 14.6% owing to fluctuation in the global crude markets; PM Nawaz will take final decision

ISLAMABAD: Officials in the Ministry of Petroleum and Natural Resources have revealed that petroleum product prices in the country could be increased by up to 14.6% for June 2016 due to a rise in global crude prices.

The ministry received a summary from the Oil and Gas Regulatory Authority (Ogra) on Monday that recommended an upward revision in oil prices as international crude rates reached $50 per barrel.

Prices of all petroleum products, except for kerosene oil, are deregulated and Ogra only monitors their prices.

The government has the capability to absorb the impact of proposed increase in oil prices by adjusting the tax rates on petroleum products.

Despite a decline of over 50% in global prices, consumers have largely been denied a full relief in previous months due to hefty taxes to avoid revenue loss to the government.

At present, two types of taxes are being charged from the oil consumers including petroleum levy and general sales tax.

The Ministry of Finance may oppose any proposal for keeping oil prices unchanged in the latest revision as it would affect the country’s revenues. Final decision will be taken by Prime Minister Nawaz Sharif.

However, officials suggest that the government could still keep oil prices unchanged before the announcement of federal budget in an attempt to avoid criticism from the political parties and people who will face new or increased taxes in the budget.

Breakdown

Following the global price rise, the effect will be felt in prices of petrol, high-speed diesel (HSD), light diesel oil (LDO), kerosene oil, high octane blending component (HOBC), JP-1, JP-4 and JP-8.

According to Ogra’s summary, petroleum ministry officials said the consumers of HSD, which is mostly used in the transport and agriculture sectors, may face a hike of Rs6.69 (9.2%) which would take the price to Rs79.21 per litre from the existing Rs72.52.

Petrol price may go up from the existing Rs64.27 to Rs65.12 per litre, an increase of Rs0.85 (1.3%).

The price of kerosene oil, used for cooking purposes in remote areas where liquefied petroleum gas is not readily available, may be increased from Rs43.25 to Rs47.22 per litre with an increase of Rs3.97 (9.2%).

Similarly, LDO, mainly used for industrial purposes, may record an increase of Rs4.47 (11.8%), meaning the price will go up from Rs37.97 to Rs42.44 per litre.

The price of HOBC, mainly used in luxury cars, may rise by Rs2.18 (3%) taking the rate to Rs74.86 from Rs72.68 per litre.

Prices of JP-1, JP-4 and JP-8 may be increased by Rs5.66 (14.6%), Rs3.21 (9%) and Rs4.70 (12.6%) per litre respectively.

Published in The Express Tribune, May 31^st, 2016.