Crude oil prices in the international market continue their downward trend, causing many analysts to predict a possible fall in domestic petroleum prices. Data indicates that Brent crude oil prices have been plummeting significantly.

 

Brent crude oil futures recorded a 2.38 percent decline in just 24 hours, causing the price to drop below $64 per barrel. However, the drop in Brent crude oil prices has been more pronounced over the past fortnight as prices reportedly sat at a comfortable $74.95 per barrel on March 31.

 

As Pakistan is a net importer of petroleum products, the $10 per barrel fall in Brent prices could allow consumers to witness relief if the government does not tack on additional charges. According to reports, the petroleum development levy currently stands at its maximum legal limit of 70 rupees per liter on both petrol and diesel.

 

Analysts have predicted that the price of petroleum products could drop by approximately 11 to 12 rupees per liter. Reports indicate Islamabad might consider levying the General Sales Tax (GST) on local petroleum products.

 

This is because while fuel prices are estimated to fall, consumers may not realise the full magnitude of the fall in price as the government may attempt to boost its own revenues. This could allow the government to consolidate its fiscal position, as levying taxes on fuel does not substantially decrease the quantity of fuel the economy demands.

 

Currently, Pakistan does not charge consumers any general sales tax (GST) on petroleum products. However, fuel suppliers and distributors tack on an additional 17 rupees per litre as markup.

 

All eyes are on the Oil and Gas Regulatory Authority (Ogra), which is responsible for making revisions to fuel prices. Analysts have highlighted the benefits of slashing fuel prices.

 

A fall in High-speed diesel (HSD) rates could benefit the transport sector given the sector’s reliance upon HSD. The fall in HSD prices is likely to spur economic activity across various sectors. 

 

For instance, the transportation sector has diesel as a primary input and thus requires vast quantities of the commodity. With a fall in HSD prices, these businesses could witness a drop in operational costs and, ultimately, a rise in profit margins.

 

As per analysts, bus fares tend to be sticky when diesel rates drop. As such, drops in the price of diesel might not benefit commuters and could rather funnel funds into the pockets of the owners of transport companies.