Soaring oil prices: Plight of the poor

In early June, Petrol pumps across the Pakistan have been selling fuel at exorbitant rates under the pretext of “fuel shortage” despite Pakistan government’s announcement of reduction in prices of petroleum products, and the provincial governments has miserably failed in taking action against those involved in this artificial shortage. Since then it was being speculated that the Imran Khan government is looking at the possibility of completely deregulating petrol pricing and marketing, and may remove uniform pricing mechanism.

New hike!

But this has not happened, and another step of the Government of Pakistan has led to a very sharp increase in fuel prices. And now prices of petrol in Pakistan soared to Pakistani Rupees 100.10 per litre from Rs 74.52 earlier, a whopping Rs 26 rise. This is a direct outcome of a Tehrik e Pakistan government decision, led by Prime Minister Imran Khan to increased the prices of all petroleum products by up to Pakistani Rupees 26, and diesel prices by Rs 21.31 per liter. By this hike, diesel prices have risen to Rs 101.26 per litre in Pakistan. Meanwhile, kerosene oil cost has surged to Rs 59.06 per litre. The price of light diesel oil (LDO) has also been pushed up by Rs 17.84 to Rs 55.98 from the current Rs 38.14.

Corona factor and fuel prices!

In Pakistan average petrol sales are touching 700,000 tonnes per month against the monthly consumption of around 600,000 tonnes of diesel.

The gap between demand and supply is also widening this gap. In outer areas petrol is being sold at Rs150 per litre and can only be availed by waiting in long queues for hours,”

According to the sources, due to lack of demand for petroleum products during months of lockdown and continuous reduction in prices, oil companies suffered loss of billions of rupees and following the federal government’s proposal to impose a tax of Rs20 per litre in the budget for the next financial year, oil companies have cut off supplies to most petrol pumps across the country to cover their losses. It is expected that this shortage would continue till the announcement of the federal budget, they added.

Previous ups and downs

The Pakistan government has cut local fuel prices four times since March 1, resulting in an overall drop of Rs42.1 per litre from Rs116.56 to Rs74.5 per litre (official rates). It was able to do so after international crude oil prices crashed. However, the government doubled petrol tax from Rs15 as of January to Rs30 now. The government charges sales tax on petrol at 17%, but it keeps changing the amount of the petroleum levy, which is its main tool to increase tax revenue from oil consumption or pass on any relief to the consumers. Presently you pay Rs41 on every liter of petrol, including sales tax. And now there is an absolute possibility that petrol prices for July are likely to increase. This is because the price of international crude oil has also increased from $20 a barrel two months ago to more than $40 per barrel in June.

Pakistan’s economy has witnessed a steady decline since 2018, when Prime Minister Imran Khan’s government came into power. Hike in oil prices impact on economic growth, with people in developing countries like Pakistan expected to suffer most. In a country like Pakistan, people suffer from direct impacts as decreased use of energy and transport facilities, and indirect due to increasing government expenditures for oil subsidies which impacting on expenditures on health services and education, and a steep hike in goods of daily needs. The larger part of the population of the country, which has lost its source of livelihood due to the disaster of Corona, may face more difficulties due to this price increase.