Govt increases petrol price by Rs3.40, HSD by Rs6.72 per litre for Sept 10

Read:Petrol hike pushes goods freight rates up 5%On 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.

Since the new system was introduced, a massive increase has been witnessed in prices, with petrol rising by over Rs50 per litre, while diesel has also gone up by around Rs40 per litre. 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. Also Read:Oil sector rejects new price formula.

Brent crude prices surged past $100 a barrel on Wednesday, as escalating conflict in the Middle East fuelled ‌worries about energy-driven inflation and sent global stocks tumbling ahead of several major central bank decisions.

Brent crude futures rose as much as 3% to a session high of $100.95, breaching the symbolic price level for the first ‌time since July 24, after Iran said ⁠it fired ballistic missiles ​at a US base in Jordan and both sides claimed to have attacked vessels, ​raising worries about oil supplies from the region.