Petrol, Diesel Prices Likely to Rise Again This Week

Consumers may face another increase in petroleum prices, with preliminary estimates indicating that petrol could become approximately Rs10 per litre more expensive, while the price of high-speed diesel (HSD) may rise by nearly Rs40 per litre in the upcoming fortnightly review scheduled for Friday night.

The projected adjustments are based on international benchmark prices recorded during the current pricing cycle, although one day's Platts assessment is still pending. As a result, the estimated increases may be revised upward or downward before the government finalises the new consumer prices.

The anticipated hike comes only a week after the July 10 price revision, under which the government increased petrol by Rs13.18 per litre to Rs310.71 and HSD by Rs13.80 per litre to Rs323.30.

According to industry sources, the federal government has the option of limiting the impact on consumers by reducing the Petroleum Development Levy (PDL), which forms a significant portion of retail fuel prices and is entirely within the government's policy control.

A reduction in the PDL could absorb part of the increase resulting from higher international oil prices. If the levy is reduced sufficiently, the government may even be able to keep domestic petrol and diesel prices unchanged despite the rise in global fuel costs.

However, if the Petroleum Development Levy remains at its current level, consumers are expected to bear the full impact of the increase in international petroleum prices.

The final revision will depend on the remaining Platts benchmark assessment, exchange-rate fluctuations, and the government's decision regarding the applicable PDL before the official notification is issued.

Pakistan determines domestic petroleum prices under the Import Parity Pricing (IPP) mechanism, which links local ex-refinery prices with international Platts assessments for refined petroleum products in the Arab Gulf market.

Under this pricing model, benchmark prices are adjusted for premiums, freight charges, marine insurance, port handling costs, inland transportation expenses, and exchange-rate movements before arriving at the ex-refinery price.

The government subsequently adds the Petroleum Development Levy, Inland Freight Equalisation Margin (IFEM), oil marketing companies' margins, dealers' commissions, and other applicable charges to calculate the final retail prices payable by consumers.

Should the projected increase take effect, higher fuel costs are likely to place additional pressure on inflation by increasing transportation, logistics, and distribution expenses across the economy.