Petrol prices likely to go up, diesel expected to drop

Petrol prices for the next fortnight are projected to spike once again by about Rs4 per litre. However, the price of diesel is expected to drop because of unstable exchange rates and international market conditions.

According to reports, petrol prices could rise by Rs4.5 rupees per litre. On the contrary, high-speed diesel (HSD) and kerosene prices might witness a drop – under Rs1 per litre. These, however, are only preliminary estimates and are subject to change as per the final calculations by federal authorities, which is due by February 28.

Currently, HSD prices sit at a sky-high of Rs263.95 per litre while petrol prices stand at an uneasy Rs256.13 per litre. The sale price of kerosene is officially listed at Rs171.65 rupees per litre but reports claim it is being sold for an extortionate Rs350 per litre.

The aforementioned fuel rates are subject to change after authorities review existing prices. According to reports, the jump in petrol prices is being linked to a rise in international rates. Concurrently, exchange rate losses were recorded against the dollar, which can partially explain why prices are projected to rise.

As of publishing, Brent Crude Oil prices have remained fairly stable dropping just $2.38 per barrel over the past 14 days.

The expected rise in petrol prices could hurt the economy as pressures on the import bill are likely to rise. Historically, cash-strapped Pakistan has been a net importer of petroleum-based products. Data from recent years revealed that the country’s largest imports were petroleum gas ($7.56 billion), refined petroleum ($6.47 billion) and crude petroleum (4.78 billion).

However, the projected fall in diesel 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 prices projected to fall, these businesses could witness a decline in operational costs, and ultimately, a rise in profit margins.

Islamabad charges a tax of approximately Rs76 per litre on both HSD and petrol. The bulk of this tax, a staggering Rs60 per litre, is charged under the category of petroleum development levy, whereas the other charge of Rs16 goes towards Customs duty.

Pakistan does not charge consumers any general sales tax (GST) on petroleum products. However, fuel suppliers and distributors tack on an additional Rs17 per litre as markup.