Petrol prices currently are at the highest level ever witnessed in Pakistan after the recent increase of 4.9 percent over the previous months, took the gasoline price to Rs.88.95/litre. In the months gone by, you would expect media frenzy over an all-time high petrol price level but thankfully nothing of that sort happened and news coverage was confined only to objective reporting, instead of the usual barrage of responses from disgruntled motorists. It is difficult to decipher whether this was due to the media frenzy over the tense situation on the national front or because of the realisation that such increases are not petrol bombs as previously portrayed. Near 5 percent increase is a conflux of factors ranging from slight increase in global crude oil prices to significant depreciation of the rupee against the greenback. Global crude oil inched up ever so slightly, registering a mere 1.5 percent month-on-month increase during September. The resultant increase in base products prices was in line with global crude oil price movement, showing slight increase in different categories. What caused the petrol prices to rise as much as they did was primarily the constant beating that the rupee received in the exchange market against the dollar. The local currency depreciated one percent on month-on-month basis, during the reference period of September-resulting in inflated prices of reference fuels to go along with the product price increase. Another factor that contributed towards increased petrol prices is the implementation of phased deregulation of the pricing mechanism. In the second phase of deregulation, the dealers margins have been increased by Rs.0.16/litre, after having been increased in the first phase by Rs.0.41/litre. On the diesel front, the government finally got its timing right; deciding to raise the Petroleum Levy by Rs.1.77/litre to take advantage of a slight decline in HSD reference prices. In the past, the government often erred on the timing of imposing PL which often coincided with increasing fuel prices. Raising the dealers margin on HSD also proved to be a much easier task this time around as the HSD base price slightly dwindled. It should be remembered that the petrol price could have been much higher had the government been charging the intended Petroleum Levy at Rs.10/litre. Global crude oil prices have receded because of the eurozone crisis and there are expectations of further falls in its international rates as global economic output is expected to remain weak. This should give the government an opportunity in the near future to hold back on reductions of local fuel prices to generate additional funds through the imposition of PL. The government through advertisements has rightly mentioned that Pakistani consumers enjoy gasoline at much discounted rates compared to many other oil importing countries-as the tax incidence elsewhere is very high: in some cases as much as 50 percent of the total price. However, there is little sense in advertising that consuming less oil would mean a stronger Pakistan and would help dedicating more resources to the welfare of the people. And certainly, the copywriters in the government of Pakistan need to realise that Pakistan meets more than 85 percent of its oil demand through imports and not exports as it is being advertised.
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PETROLEUM PRICE MONTHLY COMPARISON
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Unit Sep-11 Oct-11 chg
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Naphtha $/MT 926 934 0.8%
HSFO $/MT 663 671 1.2%
Kerosine Oil $/bbl 124 123 -0.7%
Gas Oil $/bbl 122 122 0.0%
Gasoline 95 RON $/bbl 121 124 2.8%
Exchange rate Rs 86.7 87.5 0.9%
Petrol Rs/ltr 84.8 88.95 4.9%
Diesel Rs/ltr 92.64 94.15 1.6%
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Source: Ogra
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