According to State Bank of Pakistan latest report on “State of the Economy” Pakistan ranks 32 out of 170 countries (No. 1 being the lowest) in terms of price of gasoline. This means that Pakistan is currently among the countries that offer lowest fuel prices.
Subsequently, crude oil prices have dropped across the globe over the past few, which favors countries like Pakistan that depend on fuel imports for most of their energy needs.
To offer a more detailed picture of the petroleum prices in the country, from February 2016 to March 2017, the price of crude oil in international market has surged 64%, while prices in Pakistan increased only 2.3%. Adding to that, report published by State Bank of Pakistan indicates that the price of crude oil in India has increase 22.7% during the similar timeframe. Countries that import crude oil have experienced an increase in the price in the range of 9.4% to 40.1%.
Interestingly, Pakistan’s dependence on the imported fuel has increased recently after the introduction of higher quality petroleum – RON 92, which replaced RON 87 in November 2016. Also, low Sulphur Diesel oil was introduced in Pakistan in January 2016 with 500 ppm Sulphur content compared to 5,000 ppm that was used earlier. It is pertinent to note that local refiners lack the equipment to produce the higher quality fuel in Pakistan.
Prices To Surge Soon
Industry experts believe that because of the added burden on the national exchequer, a surge in the fuel prices is certain.
While the motor fuel index carries a relatively small weight of 3.03% in the country’s CPI basket [inflation index], its actual impact on inflation is larger due to second-round impacts [like the cost of goods transportation]. – SBP
Lower prices of fuel has helped the government and financial bodies by keeping the inflation rate at 4.18% during the first 11 months of FY 2016-2017. However, this will change soon as the report indicates
In the bigger picture, it appears that the impact of quality upgrades on domestic prices is yet to materialize. However, going forward, recent regulatory changes in the motor fuel industry may lead to important adjustments in retail prices.