By Staff Reporter
ISLAMABAD: Pakistan has recorded the world’s second-largest increase in domestic fuel prices since the outbreak of the US-Israeli war on Iran, according to global price-tracking data compiled by the country’s energy ministry.
Petrol and diesel costs have soared 56% in the South Asian nation, second only to Myanmar’s 90% rise and far outstripping increases recorded in the United States, Britain and several regional peers. The surge reflects the combined pressure of global oil-market volatility triggered by disruptions in the Strait of Hormuz and Islamabad’s commitments under a $7 billion International Monetary Fund program.
On Friday, Pakistani authorities raised petrol and diesel prices by about 15 rupees a liter, the latest in a series of increases that began after the conflict erupted on Feb. 28. Before the Hormuz disruptions took hold, petrol retailed for 266.17 rupees a liter and diesel for 280.86 rupees. The latest prices stand at 414.78 rupees for petrol and 414.58 rupees for high-speed diesel.
Energy Minister Ali Pervaiz Malik told a Senate committee on Monday that the government had scant room to avoid the politically unpopular steps, which were locked in during pre-war budget negotiations with the IMF. “When this budget was made, there was no war at that time,” Malik said. “Eighty rupees per liter [levy on petrol] was settled with the IMF that we would collect.”
The original plan placed the entire 160-rupee combined levy burden on petrol, leaving diesel untouched because of its heavy use in agriculture and public transport. Prime Minister Shehbaz Sharif’s government later secured a one-month 80-rupee relaxation on the petrol levy from the fund, but that concession expired. Restoring the full levy structure was necessary to secure approval for a more than $1 billion loan tranche last week, Malik said. “Even today, subsidies of several hundred billion rupees will still go to motorcyclists and those people, the weak classes, whom we can protect directly, through e-wallets.”
Pakistan has announced multiple rounds of fuel-price increases since late February as global energy and cargo flows through the Strait of Hormuz were disrupted. In late April, the government rolled out targeted relief measures aimed at cushioning lower-income groups while still meeting IMF fiscal targets and avoiding a wider balance-of-payments crisis.
Those steps included a 100-rupee per liter subsidy for motorcyclists, capped at 20 liters a month; up to 70,000 rupees a month for freight trucks; 80,000 rupees for larger transport vehicles; and 100,000 rupees ($360) for public passenger buses.
Malik defended the decision to allow private oil marketing companies to pass on higher import costs rather than impose stricter price controls. Ensuring uninterrupted supply during extreme volatility required giving the firms enough liquidity to keep buying expensive cargoes, he said. “This is how you end up with dead stock,” Malik explained. “The companies importing oil had to be ensured that they would not run dry. They needed to be provided with enough liquidity so they could continue purchasing the product.”
Forcing marketers to absorb losses without compensation would risk outright shortages, he warned. “If you take on the responsibility that the government will cover people’s profits and losses, then yes, you can regulate them completely.” At the same time, regulators and law enforcement agencies are closely monitoring inventories and pricing practices. Pakistan has no strategic petroleum reserve, Malik noted, so any withdrawal by private importers could quickly create supply problems.
Official energy ministry data nevertheless show inventories have actually risen during the crisis. As of May 7, crude-oil stocks stood at 515 kilotons, up from 436 kilotons on March 1. Petrol inventories reached 662 kilotons — roughly 30 days of cover — while high-speed diesel stocks climbed to 597 kilotons, equivalent to 27 days of supply.
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