Govt increases petrol price by Rs4.1, HSD by Rs6.41 per litre for Sept 16

The federal government on Tuesday increased the price of petrol and high-speed diesel (HSD) by Rs4.1 and Rs6.41 per litre, respectively, for September 16.

According to a notification issued by the Petroleum Division, the price of petrol was fixed at Rs384.34 per litre, while HSD would cost Rs415.83 per litre for Wednesday.

The latest revision comes a day after the government increased the price of petrol and HSD by Rs4.42 and Rs6.10 per litre, respectively, for September 15.

Read: Govt increases petrol price by Rs4.42, HSD by Rs6.10 per litre for Sept 15

On July 17, the government announced a new pricing mechanism under which petroleum product prices would be reviewed and notified on a daily basis, replacing the weekly pricing mechanism, as renewed tensions between the United States and Iran continued to drive volatility in global oil markets and raise concerns over fuel supplies.

The Prime Minister’s Fuel Relief Scheme, already operational in Islamabad, would be rolled out across the country at midnight on September 16, the office of the deputy prime minister said on Tuesday.

PM Shehbaz Sharif on Sunday announced a special relief scheme offering Rs100 per litre off petrol for motorcycles, three-wheeler rickshaws, and cars up to 800cc engine, in an attempt to shield lower-income consumers from the impact of sharply rising petroleum prices.

Under the proposal, an estimated 11.8 million beneficiaries would be covered. Around 10 million two-wheeler users and 800,000 three-wheeler users would be entitled to relief on 20 litres of fuel per month, translating into a maximum monthly benefit of Rs2,000 per beneficiary.

Another one million users of cars of up to 800cc would receive relief on 30 litres per month, providing them a maximum benefit of Rs3,000 each. The government estimated the monthly fiscal impact of the scheme at Rs24.6 billion – Rs20 billion for two-wheelers, Rs1.6 billion for three-wheelers and Rs3 billion for cars.

Read More: PM unveils plan to cushion fuel shock

The proposed relief comes amid a steep increase in domestic petroleum prices following volatility in international oil markets due to the Gulf crisis. Petrol prices increased by Rs72 per litre, or 24%, between July 1 and September 11, while high-speed diesel rose by Rs87 per litre, or 28%.

The government noted that Pakistan’s heavy dependence on imported crude oil and refined petroleum products meant increases in international prices translated directly into higher domestic retail prices.

Officials said lower-income consumers were facing severe economic pressure from higher petroleum prices and resulting inflation. Subsequently, the prime minister directed the authorities concerned to devise a mechanism to provide relief to the poorest segments of society.

Also Read: Govt details registration process for Rs100 petrol subsidy

Global geopolitical developments continue to pose significant risks. International oil prices are influenced by decisions taken by OPEC+, conflicts in the Middle East, sanctions on oil-producing nations, and disruptions in critical shipping routes such as the Strait of Hormuz and the Red Sea. Any interruption in these supply chains can immediately increase crude oil prices and freight costs. Since Pakistan imports the majority of its petroleum requirements, these developments quickly translate into higher domestic fuel prices.

Oil prices rose nearly $3 on Tuesday after a report said oil loadings at Saudi Arabia's Red Sea port of ‌Yanbu had been suspended, and Libya halted operations at three oil fields, heightening concerns that disruptions to key oil supply routes could persist for weeks.

Brent crude futures were up $2.81, or 2.66%, at $108.49 a barrel at 1106 am ET (1506 GMT), while US West Texas Intermediate futures were up $3.29 to $104.68 a barrel.

In Libya, separately from the Iran conflict, the National Oil Corporation (NOC) said operations at three oil fields were suspended after protesting ​members of the Petroleum Facilities Guard shut a valve on the Hamada-Zawiya crude export pipeline.

Libya was the seventh-largest crude oil producer in OPEC in 2023, according to the US Energy Information Administration.

"Fresh attacks by the Houthis targeting Saudi Arabia may be influencing ​oil market investors' expectations about the severity and duration of the conflict," said Hamad Hussain, senior climate and commodities economist at Capital Economics.