Govt decreases petrol price by Rs3.13, increases HSD by Rs3.74 per litre till Sept 7

Read:Govt increases petrol price by Rs2.84, HSD by Rs2.28 per litre for Sept 4On July 17, the government announced a new pricing mechanism under which petroleum product prices would be reviewed and notified on a daily basis, replacing the weekly pricing mechanism, as renewed tensions between the United States and Iran continued to drive volatility in global oil markets and raise concerns over fuel supplies.

2024-25, petroleum products constitute one of the country's largest import categories, making the economy highly vulnerable to changes in global crude oil prices. Domestic refineries satisfy only part of national demand, while the remainder is met through imports of crude oil and refined petroleum products.

Consequently, every increase in international oil prices raises Pakistan's import bill, pressures foreign exchange reserves, and contributes to inflation. Pakistan previously exercised significant government control over petroleum pricing through subsidies and administrative interventions. While these measures temporarily protected consumers, they imposed substantial fiscal costs.

During periods of elevated global oil prices, successive governments delayed passing price increases to consumers, creating financial pressures for oil marketing companies, refineries, and the national budget. Large fuel subsidies widened fiscal deficits, increased public borrowing, and weakened macroeconomic stability.

Global geopolitical developments continue to pose significant risks. International oil prices are influenced by decisions taken by OPEC+, conflicts in the Middle East, sanctions on oil-producing nations, and disruptions in critical shipping routes such as the Strait of Hormuz and the Red Sea.

Any interruption in these supply chains can immediately increase crude oil prices and freight costs. Since Pakistan imports the majority of its petroleum requirements, these developments quickly translate into higher domestic fuel prices.

Oil prices slid on Friday ​but were on course to gain more than 6% for the week after the United States and ‌Iran resumed military exchanges in the seventh month of theirconflict, while US diesel prices hit a record high.

Brent crude futures were down 23 cents, or 0.24%, to $95.29 a barrel by 10:38 am CDT (1538 GMT), and West Texas Intermediate crude futures were down 54 cents, or 0.59%, at $90.76. "All sectors of the ​economy are affected by diesel.

This is one of the reasons why the government bond yields in the United States are ​so high; it's the expectation that inflation will continue to go up," said Claudio Galimberti, chief economist at Rystad Energy.