Pakistan likely to see major reduction in fuel prices

The Pakistan government is likely to reduce fuel prices by around PKR 10 per liter — on the back of a major drop in international crude oil prices — unless it decides to hike the petroleum development levy (PDL).

The government is to review petroleum prices for the next fortnight on March 15 and initial estimates reveal that petrol price is likely to be slashed by PKR 12.74 and diesel price by PKR 10.08 per liter.

Crude oil prices in global markets saw fresh pruning in the last week, hitting a four-year low because of global efforts to end the Ukraine-Russia war, reduced demand because of the trade war and Organization of Petroleum Exporting Countries' (OPEC) decision to increase production.

Arab light crude was down by 1% to $74.95 per barrel while U.S. crude fell by 4.7% to $66.7 per barrel and Brent by 5% to $70 a barrel.

Thus, the decline in fuel prices for Pakistanis is likely to be around PKR 10-12 per liter unless the government raises the PDL which is currently at PKR 60 per liter.

The increase in the PDL cannot be ruled out because the country is facing a shortfall of more than PKR 600 billion in tax collection during the first seven months of the current fiscal year.

The full fiscal year PDL collection target is around PKR 1,280 billion, while in FY24, total collection was around PKR 1,019 billion, according to Finance Ministry data.

Crude oil prices have dropped because of persistent deflation in China, the world's biggest importer.

Separately, U.S. President Donald Trump told Fox News that the economy is facing a “period of transition” after he imposed tariffs on various countries leading to the start of a trade war.

U.S. Federal Reserve Chair Jerome Powell has also acknowledged the rise in uncertainty, though he emphasized there was no need to rush and cut rates.