Government Considers Maintaining Stable Oil Prices in the Upcoming Fortnight

In an anticipated move, the government is contemplating keeping oil prices stable for the next fortnight, reflecting a careful approach to address the impact of global dynamics on fuel costs.

As per the routine bi-monthly schedule, the government is poised to unveil the new prices on December 31, with the changes taking effect from January 1, 2024, and remaining applicable until January 15. Projections from industry insiders suggest a potential decrease of Rs1 per litre for petrol and kerosene oil, while high-speed diesel (HSD) and light diesel oil (LDO) may experience an increase of Rs2 per litre.

These estimates, provided by Oil Marketing Companies (OMCs), are based on the assumption of no adjustments in the exchange rate, existing petroleum levy (PL) rates, and general sales tax (GST) rates. Currently, the government imposes a PL of Rs60 per litre on petrol and HSD, accompanied by a zero GST rate.

Internationally, Brent crude prices have exhibited fluctuations between $77.95 and $81.07 per barrel since December 16, 2023. The government's last assessment applied an exchange rate of Rs284.28 to a US dollar.

Simultaneously, considerations regarding potential drone and missile attacks by the Houthis have led companies transporting crude oil to consider rerouting some tankers away from the Red Sea. This strategic adjustment is anticipated to introduce delays and additional costs for these journeys, potentially exerting upward pressure on oil prices.

Recent data from the Pakistan Bureau of Statistics (PBS) reveals a 29% decline in imports of refined products to $499 million in November 2023 compared to $708 million in the previous year. In contrast, crude oil imports have increased by 4% to $566 million from $546 million in the same month last year.

In the first five months of the fiscal year 2023 (July through November), sales of petroleum products saw a notable 16% decrease, according to the Oil Companies Advisory Council (OCAC). Higher petroleum costs during the same period last year are blamed for this reduction.

While maintaining stability in oil prices is under consideration, it's noteworthy that companies transporting crude oil have already taken precautionary measures by redirecting some tankers away from the Red Sea to mitigate potential threats, a decision that may impact the global oil market in the near term.