Petrol and diesel are anticipated to surpass the Rs300 threshold, marking the first instance of such prices in the country’s history.
Amid recent rises in global oil prices and the weakening of the Pakistani rupee against the US dollar, the Oil and Gas Regulatory Authority (Ogra) is considering suggesting higher prices for petroleum products in the coming weeks, according to a report by The News on Tuesday.
There’s a possibility that the cost of petrol could go up by Rs12 per liter, while diesel might see a hike of Rs14.83 per liter starting from September 1, 2023.
An official from the Energy Ministry expressed concerns about how this move could worsen inflation, which is currently at a high of 28%. They mentioned that with people already struggling due to protests over inflated electricity bills, this potential price increase could further burden the masses.
However, the government is facing a dilemma. If they decide to intervene and prevent the increase, they risk violating terms and conditions set by the International Monetary Fund (IMF) for their $3 billion standby agreement loan. This agreement obligates the government to pass on changes in the prices of petroleum products.
The value of the US dollar has risen to Rs301.75 in the interbank market, and it’s being sold at around Rs319 in the open market, adding to the challenges.
In August alone, petrol prices have already gone up by Rs37.50, while diesel has surged by Rs40 per liter. Interestingly, authorities previously based the calculation of fuel prices on a dollar value of Rs287. However, starting September 1, 2023, they intend to use a rate of Rs299, considering the exchange rate impact of Rs12, which will contribute significantly to the anticipated increase in fuel prices.
It’s worth noting that the recently increased 10% charges for the confirmation of letters of credit (LC) are also included in the pricing of Pakistan State Oil (PSO) petroleum products, as explained by an Energy Ministry official.
Currently, the price for Mogas (a type of gasoline) stands at Rs290.45 per liter, but this could potentially rise by Rs12 per liter, reaching Rs302.45 per liter. Similarly, the price of High-Speed Diesel (HSD), which currently is Rs293.40 per liter, might increase by Rs14.83 per liter, reaching Rs308.23 per liter.
Diesel’s price increase can have significant inflationary effects, especially considering its use in heavy transport, trains, and agricultural engines like trucks, buses, tractors, and other machinery. This can impact the cost of daily essentials, including vegetables.
On the other hand, petrol finds extensive use in private vehicles, rickshaws, and two-wheelers. Any increase directly impacts the budgets of middle and lower-middle-class citizens, potentially adding to their financial burdens.