Karachi, October 6, 2023 – Pakistan may announce a significant reduction in petroleum product prices for the second half of October 2023 following a substantial drop in international oil prices.
This move comes as international oil prices have plunged due to a combination of factors including demand concerns, a stronger US dollar, inflationary pressure, and increased supplies, according to analysts at Arif Habib Limited.
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Over the past week, international oil prices have experienced a notable decline, with key benchmarks such as WTI, Brent, and Arablight seeing decreases ranging from 9 percent to 11 percent compared to the previous fortnightly averages.
One of the most significant drops occurred in the international gasoline (Motor Spirit, or MS) market, which plummeted by 15 percent, reaching USD 84.3 per barrel, compared to the previous fortnightly average of USD 99.3 per barrel. Similarly, the international prices of High Speed Diesel (HSD) also decreased by 10 percent, falling to USD 110.6 per barrel from the previous fortnightly average of USD 122.3 per barrel.
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Additionally, the Pakistani Rupee (PKR) has appreciated by 2.7 percent, reaching a rate of 283.87 PKR against the US dollar, compared to the previous fortnightly average of 291.65 PKR.
Taking into account the aforementioned international oil prices, PKR appreciation, and assuming that these conditions persist for the next 10 days, analysts anticipate a significant drop in local petrol and diesel prices for the upcoming fortnightly pricing, effective from October 16, 2023. The expected reductions are estimated to be PKR 41 per liter for petrol and PKR 19 per liter for diesel.
It is worth noting that in the last fortnightly pricing adjustment, there was a PKR 11.9 per liter increase in petrol prices, while diesel prices decreased by PKR 2.8 per liter.
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Even if the same currency adjustment for MS and no change in HSD prices is assumed for the upcoming fortnightly prices, the expected reductions are still substantial, with an estimated decrease of PKR 28.6 per liter for MS and PKR 19.3 per liter for HSD.
The anticipated reduction in petroleum product prices is expected to have a positive impact on inflation. With these price reductions factored in, the estimates for the Consumer Price Index (CPI) for October 2023 are projected to decrease by 92 basis points to 27.5 percent, providing some relief to consumers amid ongoing economic challenges.
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The government is expected to make an official announcement regarding these price adjustments in the coming days, with many Pakistanis eagerly anticipating the relief that lower fuel prices may bring in the second half of October 2023.
