On March 15, 2023, Pakistan is set to announce the new petroleum prices for the next fortnight (March 16 – 31). However, the current decline in the value of the rupee has increased the likelihood of another hike in petroleum prices over the next two weeks.
Over the last year, the rupee has experienced a significant drop in value. In fact, it is now considered the worst currency in the region due to its depreciation against the dollar. From PKR 178.63 on March 10, 2022, the rupee has fallen by 57% and is now valued at PKR 280.77 to the dollar on March 10, 2023, in the interbank foreign exchange market.
On the other hand, crude oil prices in the international market have fallen sharply. Despite the Russia-Ukraine conflict, benchmark Brent crude oil prices have dropped by around 30% in a year, from $115 per barrel in March 2022 to $83 in March 2023.
Despite these global price drops, domestic prices of petrol and high-speed diesel (HSD) have increased by 78% and 94%, respectively, on a year-on-year (YoY) basis by the week ended March 9, 2023. This is in contrast to what is expected based on global and domestic fuel prices, which suggests that the local market should have lower prices to provide relief to the people of Pakistan.
Unfortunately, the government’s ill-conceived policies for making a successful IMF deal resulted in a disaster for the country. The IMF deal cost the nation with massive depreciation of the local currency and immense increase in energy prices, making life miserable for many. As a net importer of petroleum products, Pakistan has been hit hard by the sharp rise in dollar value, which adversely affected the import bill in terms of rupee, and this cost was subsequently passed on to end consumers.
During the first eight months (July – January) of 2022-2023, the import bill of petroleum group recorded a decline of 9.27 percent to $10.61 billion compared with $11.69 billion in the corresponding months of the last fiscal year. However, due to the massive depreciation in rupee value, the import bill in rupee terms recorded an increase of 19.55 percent to PKR 2.38 trillion during the period under review as compared with PKR 1.99 trillion in the same period of the last fiscal year.
With the rupee causing huge price inflation and the government implementing a petroleum levy in order to get the IMF program, the burden on oil prices has only increased further.
Despite the drop in global crude oil prices, domestic prices for MS Petrol, High Speed Diesel, Kerosene Oil, and Light Diesel Oil have remained high, with rates of Rs 267 per litre, Rs 280 per litre, Rs 187.73 per litre, and Rs 184.68 per litre, respectively.
In summary, Pakistan is scheduled to announce the new petroleum prices for the next fortnight on March 15, 2023. However, the decline in the value of the rupee may lead to another increase in petroleum prices over the next two weeks, further burdening the already struggling people of Pakistan.
