Pakistan likely to cut fuel prices further after crude gets cheaper

Pakistan is likely to slash fuel prices by up to three percent, or PKR 6-8 per liter, in its upcoming fortnightly price review on September 15 due to a sharp decline in global oil prices in recent days.

This would be the fourth consecutive reduction by the Ministry of Finance, which sets the fuel prices in Pakistan.

Since August 1, petrol prices have been reduced by PKR 16 per liter to PKR 260, while diesel rates have gone down by PKR 20 to PKR 263 per liter.

International oil prices fell nearly five percent on Tuesday to their lowest levels in around nine months on signs of a deal to resolve a dispute that has halted Libyan crude production and exports. Growing pessimism about demand, particularly from China, has also contributed to the decline in global oil prices

Brent crude futures closed down $3.77, or 4.9 percent, at $73.75 a barrel, their lowest level since December 12.

The decline in global oil prices will also relieve some pressure from Pakistan’s dwindling foreign exchange reserves, as every $5 per barrel reduction in global oil prices helps the country save an estimated $1 billion per annum on its import bill.

Analysts say another reduction in fuel prices will help ease inflationary pressures further, after the headline CPI was recorded at 9.6 percent in August — the first single-digit figure in three years.

However, they also said that a revenue shortfall of PKR 98 billion in the first two months of fiscal year 2024-25 may force the government to increase its levy on fuel prices, resulting in little or no change in rates.

The country’s Federal Board of Revenue managed to collect only PKR 1,456 billion in net revenue in July and August against a target of PKR 1,588 billion.

At present, the government is collecting a petroleum development levy — commonly known as PDL — of PKR 60 per liter. It collected PKR 165 billion in PDL in July and August, and aims to collect PKR 1.28 trillion in the entire year. Last year, the government’s PDL collection stood at PKR 1.01 trillion.