Petrol prices likely to decrease as international oil prices drop

KARACHI: The masses are set to have some relief in petrol prices as international oil prices have significantly dropped by 8.5%, plummeting from USD 79.39 per barrel on August 30, 2024, to USD 72.67 per barrel. This development marks a notable shift in the global energy markets.

This decline in petrol prices is largely attributed to the Organization of the Petroleum Exporting Countries (OPEC) revising its global oil demand forecast, leading to reduced demand and subsequent price drops, said Tahir Abbas Head of Research AHL.

As an oil-importing country, Pakistan benefits from this decline, with local fuel prices adjusted fortnightly. Over the last three adjustments, petrol and diesel prices have dropped by PKR 16.50 per litre and PKR 20.88 per litre, respectively, he said.

A fourth consecutive decline in petrol prices is expected today, with petrol and diesel prices projected to decline by PKR 13.12 per litre and PKR 14.39 per litre.

However, this decline in international oil prices presents a mixed bag of opportunities and challenges for Pakistan as recent declines in oil sales have reduced the government’s revenue under the head of the Petroleum Development Levy (PDL) collection, said Tahir Abbas.

With a target of PKR 1,281 billion for fiscal year 2025 –PKR 107 billion per month–, the government has only averaged PKR 82 billion per month so far. To address this shortfall, an increase of PKR 5 per litre in PDL –Petrol prices– is likely, which would limit the expected price cuts to PKR 8.12 per litre for petrol and PKR 9.39 per litre for diesel.

So, on the one hand, the country stands to benefit from lower import costs, which can help ease the burden on its foreign exchange reserves and reduce the overall cost of fuel for consumers. The recent trend has been favourable for consumers. However, the decline in oil prices also brings challenges, particularly for the government’s revenue collection.