Govt decreases petrol price by 50 paisas, high-speed diesel by 19 paisas for August 28

Read:Govt raises petrol price by Rs1.12, HSD by Rs1.11 per litre till Aug 27Last month, 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 on Thursday rose by more than $1, after Washington confirmed it was not in talks with ‌Iran despite diplomatic efforts by other countries, and hopes dimmed for a resumption of oil flows through the Middle East. Brent crude futures climbed $1.08, or 1.23%, to $88.92 a barrel at 11:35 am ET (1535 GMT).

US West Texas Intermediate crude futures gained 19 cents, or 0.23%, to $82.42. "The weakness in WTI reflects an increasingly comfortable US crude balance," ​said Irina Tsukerman, president at geopolitical risk consultancy Scarab Rising.