Fuel consumers in Pakistan have reason to breathe a sigh of relief as it appears that petrol prices are poised for a significant drop. A convergence of factors, including favorable global oil prices, a strengthening Pakistani Rupee, and Russia’s decision to resume pipeline diesel exports, is expected to drive down the cost of fuel. Initial estimates suggest that both petrol and diesel prices could fall substantially, likely dipping below 300 Rupees per liter by October 15.
Assuming that international oil prices and the Pakistani Rupee maintain their current levels for the next ten days, a report by Arif Habib Limited anticipates a substantial decrease in local petrol and diesel prices. This drop is projected to be around Rs. 41 per liter for petrol and Rs. 19 per liter for diesel, effective from October 16, 2023.
Arif Habib Limited recently conducted a market review, noting a significant decline in international oil prices during the week. This decline can be attributed to concerns about global demand, a stronger US Dollar, inflationary pressures, and increased oil supplies. Notably, the prices of key oil benchmarks, including WTI, Brent, and Arablight, have decreased by approximately 9% to 11% compared to the last fortnightly average prices.
The international price of gasoline (MS) has witnessed a sharp decline of 15%, reaching $84.3 per barrel, in contrast to the previous fortnightly average of $99.3 per barrel. Similarly, international prices of High-Speed Diesel (HSD) have decreased by 10%, settling at $110.6 per barrel compared to the previous fortnightly average of $122.3 per barrel.
Simultaneously, the Pakistani Rupee has strengthened by 2.7% against the US Dollar, with an exchange rate of 283.87 Rupees per USD compared to the last fortnightly average of 291.65 Rupees per USD.
Recent trends indicate that international MS and HSD rates have dropped by $12 and $9 per barrel, respectively, over the past three days. Meanwhile, the Rupee has managed to gain approximately 3% against the US Dollar since the previous fuel price review. To provide context, the exchange rate adjustments in the last fortnightly prices for MS and HSD were Rs. 11.9 per liter and Rs. -2.8 per liter, respectively. Even with the assumption of a similar currency adjustment for MS and none for HSD in the upcoming fortnightly prices, it is expected that MS and HSD will see substantial reductions, likely by Rs. 28.6 per liter and Rs. 19.3 per liter, respectively.
Considering these factors, Arif Habib Limited estimates a noteworthy decline of 92 basis points in October’s Consumer Price Index (CPI), which is expected to drop to 27.5%.
As the world grapples with economic uncertainties, the potential reduction in fuel prices offers a glimmer of hope for consumers and businesses alike, contributing to improved economic conditions in Pakistan. It is crucial for the ongoing trends to persist until the next fortnightly review of petroleum rates on October 15, ensuring that the expected relief in fuel prices becomes a reality for the benefit of all.
