Is Pakistan's Petrol Price Set to Exceed Rs. 300 Per Liter Soon?
The price of petrol has been a hot topic ever since it nearly doubled two years ago. The recent budget hints that petrol prices might reach Rs. 350 per liter next year.
A former Power Division official, now in the private sector, told ProPakistani that a gradual Rs. 20 per liter increase in the petroleum levy on petrol, the reintroduction of a 5% sales tax, and rising international market rates could push domestic prices above Rs. 300, possibly reaching Rs. 350 per liter.
Currently, petrol costs Rs. 258.16 per liter. Adding a 5% sales tax brings it to Rs. 271.07. With a 12-15% inflation increase, the price rises to Rs. 311-314. If crude oil hits $90-100 per barrel, import costs could push the price to around Rs. 330. Including the phased-in Rs. 20 levy (Rs. 5 every two weeks), the petrol price could realistically reach Rs. 350 per liter.
“Given current trends, we expect oil demand to increase, driving prices up. Geopolitical risks could add $5-10 per barrel due to conflicts in the Red Sea and reduced OPEC+ supply. Crude oil could reach at least $90 per barrel,” he said.
Last week, the Shehbaz Sharif-led coalition proposed in the Finance Bill 2024 to increase the maximum petroleum levy on petrol and high-speed diesel to Rs. 80 per liter. International crude prices have been steady at $81-82 per barrel.
“When Brent first went above $90 per barrel in 2023, petrol in Pakistan was Rs. 323 per liter. Inflation, rising demand, and the government’s new budget proposals will likely bring such rates back,” he added.
The State Bank of Pakistan (SBP) noted in its last Monetary Policy meeting on June 10 that the 2024-25 budget measures and future energy price adjustments could significantly increase inflation in July 2024 before it gradually decreases during FY25.
The World Bank warned in April 2024 that oil prices could rise above $100 per barrel if the Middle East situation worsens, potentially raising global inflation by nearly one percentage point.
Analysts now expect inflation to be more persistent than previously thought, affecting the extent and speed of SBP interest rate cuts this year. Despite potential global geopolitical disturbances, the outlook for oil markets in the coming months remains bleak, likely mirroring the previous year’s trends.
