Another oil shock is on the cards as the price of high-speed diesel is expected to be increased by Rs24 per litre effective from August 16, 2023, which will fuel a new wave of inflation that is already at significantly higher levels.
As international oil prices surge, Pakistan may raise prices of petroleum products in the range of Rs12 to Rs24 per litre in its fortnightly review for August 16-31, 2023.
In addition to the huge increase in the cost of diesel, the government may jack up the price of petrol by around Rs12 per litre.
Petrol and diesel prices have already been raised by around Rs20 per litre in the previous revision for the first fortnight of August.
Experts say that loan conditions of the International Monetary Fund (IMF) have forced the government to pass on the rising cost of international commodity prices to the domestic consumers.
Over the past two weeks, the prices of refined petroleum products have gone up by $13 to $111 per barrel. Of these, petrol cost has climbed $7 to $97 per barrel.
High-speed diesel is used in agriculture and transport sectors and any increase in its price may trigger further inflationary pressures in the country, impacting lives of the common man. Farmers, who use diesel for harvesting crops in remote areas, may be particularly hurt by the fuel price surge.
During the Pakistan Muslim League-Nawaz (PML-N) led coalition government, both the oil industry and consumers have faced shocks owing to a poor economic situation. In fiscal year 2022-23, Pakistan’s economy could expand only 0.3% compared to a growth of 6% in the previous year.
Owing to the flooding of smuggled Iranian oil in Pakistan’s market, sales of the domestic oil industry have dropped, causing serious concerns among industry players.
Petroleum dealers have flagged a surge in the smuggling of Iranian fuel to Pakistan, saying that up to 35% of diesel sold in the country has arrived illegally from Iran.
The Pakistan Petroleum Dealers Association pointed out that in the past, the smuggling of fuel was limited to the province of Balochistan, but it has now spread to the rest of the country.
Moreover, the government was manipulating the oil pricing formula to keep prices at desired levels, which led to a tussle between the regulator – the Oil and Gas Regulatory Authority (Ogra) – and the oil industry.
Now, further increase in petroleum prices may deal another blow to consumers as the government has agreed with the IMF to stop subsidising the oil consumers.
Published in The Express Tribune, August 13th, 2023.
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