Pakistan government announces significant reduction in petroleum prices

The government of Pakistan is set to announce a significant reduction in petroleum prices, with expectations of a decrease of up to Rs12 per litre starting June 15. This anticipated cut is a result of a $5.14 per barrel drop in global oil prices, which could lead to a substantial Rs12 per litre reduction in petrol prices across the country. It is worth noting that petrol prices have already experienced a decline of Rs24 per litre since April 16, while diesel prices have also seen a Rs20 per litre drop.

On June 1, a sudden change in the government's position on petrol prices occurred late at night, reportedly due to a disagreement between the prime minister and the finance minister. The finance minister's insistence on revisiting the decision during discussions with the IMF was cited as the reason for this shift. Furthermore, the government has surpassed its full-year target by collecting over Rs900 billion in petroleum development levy from petroleum product sales within just 11 months of the current fiscal year.

In May 2024, there was a notable surge in demand for petroleum products, reaching a nine-month high of 1.4 million tons following the price reduction. This surge led to total consumption reaching 13.8 million tons from July to May 2023-24. Analysts at Topline Research highlighted that tax collection through the Petroleum Development Levy (PDL) amounted to Rs907 billion during the same period, with projected revenues ranging from Rs990 billion to Rs1 trillion based on a monthly average of Rs80-85 billion.

The expected decrease in petroleum prices in Pakistan comes as a relief to consumers and businesses alike, offering potential savings and stimulating economic activity. With global oil prices playing a significant role in determining local fuel costs, the government's decision to pass on the benefits of reduced prices to the public is a positive development. As the country continues to navigate economic challenges, such initiatives can help alleviate financial burdens on the population and drive growth in various sectors.