Wednesday, September 27, 2023

Massive Increase in Petroleum Prices Expected in Pakistan from September 1st

There might be a big rise in the cost of petrol and diesel in Pakistan due to the rupee losing its value against the US dollar. The price of petrol could go up by over Rs13 per litre in the next two weeks, and this might happen by August 31.

The dollar’s value has gone up by Rs12.08 from August 16 to August 24. This means that petrol and diesel prices could increase from September 1 because of the higher dollar value. Even though the prices of oil products and crude oil haven’t changed much globally, the cost might still go up due to the higher dollar value.

This could lead to even more expensive petrol and diesel in September, and the prices might even go up by a lot.

In the last two weeks, the price of petrol has already gone up by Rs37.50 per litre, and diesel has become Rs40 more expensive. If we look at the situation now, the dollar’s value has gone above Rs300, and in the open market, it’s Rs314.

Because of this, the price of crude oil and oil products bought in US dollars might make the prices of petrol and diesel go up even more in the first two weeks of September. This could even make the prices go up by double digits.

The charges for confirming LCs (letters of credit) have also gone up by 10%, even though they used to be 0.5-1% a few years ago.

Despite this situation, the Finance Minister and the central bank don’t seem to be taking any action to control the rising US dollar, even with the $3 billion loan from the International Monetary Fund.

Because of the higher dollar value, electricity prices might also go up, as the monthly fuel adjustment charges and quarterly tariff adjustments could make electricity more expensive. The National Electric Power Regulatory Authority has already increased the base tariff by Rs3 to Rs7.50 per unit for different types of consumers.

The base tariff was decided at a dollar value of Rs287 and an inflation rate of 17%, which is far from the actual situation. The dollar’s value is now Rs300.33 with an inflation rate of 28%.

The government wants to increase the tariff by Rs2.07 per unit in July 2023. They pass on the changes in fuel prices to consumers. The government has asked for an increase in tariff by Rs5.40 per unit for the last quarter of FY23 and wants to collect this extra money in three months.

They plan to spread out the impact of the last quarter adjustments from October 2023 to March 2024 to make it easier for people, as electricity use goes down during the winter months. But due to the higher dollar value, people might have to pay more for electricity every month in the current financial year 2023-24, along with the regular tariff increases every three months.

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