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Wednesday, July 17, 2024

Tarin defends government’s decision to increase petroleum prices

Finance Minister reiterated that petroleum prices were still the cheapest in Pakistan, compared to the rest of the world - except the sixteen oil producing countries. The government, from October 1, increased the price of petrol and high speed diesel (HSD) by 4 rupees per liter and 2 rupees per liter, respectively.

The PTI government has yet again increased petroleum products’ prices in the country. In addition the increase in the price of petrol and high speed diesel, the prices of kerosene oil and light-diesel oil (LDO) have also gone up by PKR.7.05 and PKR.8.82 per liter. This latest increase in prices of petroleum products comes against a backdrop of booming oil prices in the international market. The finance minister further added that petroleum levy had also been reduced to two to three rupees per liter from thirty rupees per liter in 2018. Two weeks earlier, the federal government had increased the prices of petrol and diesel by almost five rupees per liter.

Tarin ensured that the incumbent government had passed on the minimum increase in cost to consumers. “The government absorbed the pressure of hike in prices in the international market by bearing the burden of two billion rupees,” informed Tarin. The finance minister insinuated that Pakistan is not immune to the volatility in the global oil market.

The Oil and Gas Regulatory Authority (OGRA) had analyzed and advised the government on increasing petroleum prices, based on an increase in prices in the international market along with exchange rate fluctuations in the past two weeks. The press release by the Finance Division stated that the Prime Minister had passed on the least amount of increase in oil prices to the populace – against the recommendation of OGRA.

Read More: Pakistani oil prices to go up as international prices reach 2 year high

Earlier this week, Federal Minister for Energy Hammad Azhar had presented the same arguments during his speech in Senate. The minister took a dig at the former ruling party and pointed out that during their regime, they had not passed on the benefit of low prices of oil in the international market. “The sales tax – usually 17% on all products – was 56% on petrol at a point during the rule of PML-N,” the minister said.

The Federal Board of Revenue recently lowered sales tax on HSD to 11.64%, while maintaining it at 10.54%. Moreover, sales tax on kerosene and light-diesel oil remains unchanged at 6.70% and 0.20%, respectively. Petroleum levy remains unchanged on petrol and high speed diesel.

Read More: Asad Umar & Murtaza Wahab school each other over petrol prices

In addition to the aforementioned price increases, price of an LPG cylinder for domestic use has been raised by an astonishing 343 rupees per 11.8 kg cylinder. The new price has been set at 2403.55 rupees.

Earlier this week, Brent crude – the international benchmark – rose to as much as $80.69. This is the highest level it touched since October 2018. Investment bank Goldman Sachs has predicted that Brent crude will breach the $90 per barrel mark by the end of the year. Analysts forecast that oil prices will continue their upward trend amid surging demand and tight supplies. Demand for oil has been rising in recent months as economies around the world resurge from the pandemic. Global oil supplies were further disrupted from hurricanes Ida and Nicholas in the Gulf of Mexico, which destroyed US oil infrastructure.

The Vitol Group – world’s independent oil trading mogul – global demand for crude oil will rise by 500,000 barrels a day at the end of the year. This, in part, is due to the natural gas crisis which has engulfed the oil market as well. The expectation that due to the supply crunch of natural gas, oil will be used to fulfill the energy requirements has caused the current boom in oil prices. In Europe, natural-gas prices have more than quadrupled this year because of limited natural gas supply.