Significant drop likely in fuel prices

Prices of petroleum products might witness a significant decline on Saturday for the upcoming two weeks. As per reports, fuel prices can drop from 2.5 rupees to nine rupees per litre, depending on the type of fuel in consideration.

Experts’ speculation hinges on the fall in petroleum prices in international markets. Over the past two weeks, brent prices declined by two dollars per barrel to settle at a modest $74.5.

This spells great news for Pakistan as pressures on the import bill are likely to be alleviated. Historically, the cash-strapped nation has been a net importer of petroleum-based products. Data from recent years revealed that Pakistan’s largest imports were Petroleum Gas ($7.56 Billion), Refined Petroleum ($6.47 Billion) and Crude Petroleum (4.78 Billion).

According to reports, the ex-depot petrol price is expected to fall by a conservative 2-2.5 rupees per litre. Kerosene and light diesel oil prices are reportedly projected to follow a similar trend as they are likely to fall by 3.45 rupees to five rupees per litre.

However, unlike kerosene and petrol, high-speed diesel (HSD) might fall by a liberal of nine rupees per litre. However, these are only estimates, and real prices could vary marginally from these values.

Analysts claim that a decline in the international market is responsible for lower petroleum prices. Reports reveal that the import duty on petrol declined from $8.8 per barrel to a more manageable $7.75 per barrel. Additionally, the ex-refinery cost of kerosene witnessed a fall, allowing the prices of the commodity to drop.

The average price of petrol fell by a conservative $0.9 per barrel while HSD prices tanked – falling by $3 per barrel. However, unlike the fall in import premium on petrol, reports claimed that authorities did not alter premiums on diesel.

The fall in petroleum prices is likely to spur economic activity across various sectors. For instance, the transportation sector has fuel 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 once prices drop.

Moreover, the agricultural sector relies heavily on fuel to run water pumps and tractors. If fuel prices fall, it will be cheaper for farmers to grow their yields. This outcome could allow consumers to witness relief as farmers may choose to revise prices to capture more buyers.

With prices of foodstuffs rising because of abnormally large vegetable and rice exports to Bangladesh, consumers in the domestic economy are likely to welcome lower prices for a change.