Party’s over: Next revision of oil prices due; rates may rise again

All products – except high speed diesel – are expected to become pricier.

ISLAMABAD:

After a brief respite from rising oil prices, consumers may once again face a hike in petroleum product prices by up to Rs5.64 per litre due to an increase in global oil prices. Under the decision, all products – except High Speed Diesel (HSD) – are expected to become more expensive in the next two weeks.

As its price is pegged to the price of petrol, Compressed Natural Gas will also become more expensive.

The Oil and Gas Regulatory Authority (Ogra) has moved a summary regarding a revision in oil prices for the next two weeks in this regard; effective from July 16 to the end of the month.

According to the summary submitted to the finance and petroleum ministries, Ogra has worked out an increase of Rs1.96 per litre in the price of petrol; Rs5.64 per litre for High Octane Blending Component (HOBC); Rs1.94 per litre for kerosene oil; and Rs1.62 per litre for Light Diesel Oil (LDO).

Meanwhile, Ogra has also proposed a cut of Rs1 per litre in the price of High Speed Diesel (HSD).

An Ogra official justified the price cut in HSD by referring to the price of HSD in the international market, which has recently reduced. He also informed that the average price of Arab light crude oil has jumped from $94 to $97 per barrel. The price of petrol, too, has increased from $698 to $747 per ton, necessitating a price revision.

The new prices are expected to be effective from July 16, following a new mechanism of fortnightly reviews of oil prices after it is approved by Prime Minister Raja Pervez Ashraf.

However, Ogra has recommended the government not increase oil prices, in order to provide relief to consumers.

A senior government official said that the government was collecting over Rs25 billion every month from consumers on account of the petroleum levy and General Sales Tax (GST). Ogra has proposed that the federal government cut the rate of the petroleum levy to pass on benefits to consumers. However, the official said that the finance ministry had opposed the cut, as it is focusing on taxes collected from the sale of petroleum products to bridge its budget deficit.

The rates of the levy on petroleum products are currently at their maximum levels, as fixed by parliament. The levy on petrol stands at Rs10 per litre, HSD Rs8 per litre, HOBC Rs14 per litre, and kerosene Rs6 per litre.

Over the last few months, consumers have enjoyed cuts in oil prices in line with reductions in global oil prices. This is another reason why the government finds no space to adjust a reduction in the rate of the levy.

Previously, Ogra had notified a cut in oil prices by up to Rs6.44 per litre from July 1, 2012, in line with the fall in global prices. The cuts were announced after Ogra’s recommendations, and marked the third consecutive reduction ever since fuel prices broke the Rs100 barrier.

Current prices of petroleum products stand as such: HOBC Rs106.88 per litre; petrol Rs84.49 per litre; kerosene oil Rs86.25 per litre; HSD Rs97.21 per litre; LDO Rs83.71 per litre.

Published in The Express Tribune, July 13^th, 2012.